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Negative Criticism That’s Ended Up Promoting Cryptocurrencies

One attribute that’s always defined as cryptocurrencies is that they’re disruptive. Since they continue to upset the common order within the financial sector, they’ve turned out divisive. Today you have legions of their proponents and opponents alike. Their motivation being the value or lack of what they perceive in them. To their supporters, they are the cure-all that the financial sector has been yearning for. However, their opponents deem them a scandal that shouldn’t have happened.

It shows that cryptocurrencies have continued to hold their own despite the criticisms and objections they face. Some even think that in an ironic twist, the condemnation has turned to be positive for them. Rather than slowing their progress, it has ended up promoting them. 

So, which are these criticisms that have ended up promoting cryptocurrencies? Today we take a look at three common objections against cryptos and how they’ve spurred them.

  • They Facilitate Illicit Activity

Charlie Munger doesn’t sugarcoat his dislike for cryptocurrencies and Bitcoin(BTC) in particular. For instance, in a CNBC interview, he described BTC as “worthless artificial gold used in funding illegal activity.” He adds that it’s a scramble and that despite it being a clever science, respectable people should discourage others from using it. Clearly, he doesn’t mince his words when expressing his disdain for the premier crypto.

As he puts it, Munger isn’t the only respectable person that claims cryptos aid illegal activity. It’s thought that Jim Rickards, Bill Gates, and even former British premier Teresa May hold too. Janet Yellen called them as much.

  • Cryptos Don’t Abet Crime.

Cryptos use code to mask individual identities. Privacy coins like Zash and Monero take anonymity further by adopting zero-knowledge protocols, shielding user information from other parties to a transaction.

The question is, does this narrative hold? The simple answer is no. Research into the matter absolves cryptos of this accusation. For instance, a Chainalysis report shows that in 2019 only 2.1% ( about $21.4 billion)  of the total crypto transactions supported criminal activity. 2020 saw a sharp decline of the figures to 0.34% ($10 billion of transacted volume).

  • Traditional Finance Enables Crime More

In 2020, the Rand Corporation carried out a study that showed 99% of crypto transactions used centralized exchanges. These exchanges strictly adhere to AML/CFT requirements of the jurisdictions they operate in. That’s beside the mandatory KYC checks that they do on account opening. It concludes that privacy coins don’t enable crime as much.

Other studies indicate that the traditional financial systems abet crimes. The UN, for example, estimates that money laundering and illegal activity account for 2-5% (USD1.6-4 trillion) of the global GDP annually. Compared, proceeds of unlawful activity in crypto are significantly less. A 2020 SWIFT  report says as much.

  • They are a Bubble Waiting to Pop

Jim Rickards has some choice words to describe cryptos. He has called them reprehensible and singled BTC for a Ponzi with no one in charge.  To him, they are nothing but a fraud.

Warren Buffett and Peter Schiff have a similar take on them. They have both likened cryptos to a bubble whose bottom is itching to drop. Again they’ve called them fool’s gold. When pressed to explain how cryptos have appreciated over time, they’ve used the greater fool theory. 

  • Cryptos don’t Generate Value.

To them, cryptos are a speculative scheme. They hold that the initial investors are the ones that profited and that new entrants are just greater fools buying a myth that Hodling will enrich them.

Their thesis is that BTC and other cryptos don’t generate any value. Rickards has gone as far as attributing their meteoritic rise to users painting the tape. Thus, to them and their ilk, the drivers of crypto demand are speculation and FOMO rather than sound investment thought.

  • Fluctuations are Normal for an Emerging Market

There’s no denying that some crypto enthusiasts thrive on its volatility for speculative purposes. That said, some cryptos are defying the suggestions that they’re mere fads that will pass with time. BTC, for instance, has been around for twelve years now. It has experienced booms and bursts and recovered to relative stability from both extremes.

Analysts say the periodic rises and falls that cryptos go through are expected in any evolving market. And cryptos are still young. So in time, the market will correct itself, achieving stability. One thing is sure, though. The negative comments haven’t dampened crypto lovers’ enthusiasm for them.

  • They Lack Intrinsic Value

For skeptics, cryptocurrencies, unlike fiats, lack an intrinsic value. Bill Haris has gone on to say that they don’t have a storage value. Instead, they suggest that fiat has value because there’s government trust behind what we accept as legal tender.

One thing they’re right about is that cryptos don’t have an underlying asset to back them up. Stablecoins are an exception, though. You don’t have gold or any other asset guaranteeing the value of BTC or any other crypto, for that matter.

  • Crypto Infrastructure Adds Value

So, where do digital assets derive value? One is the infrastructure supporting crypto transactions. Think about the Blockchain technology that’s the backbone of all crypto projects. Then there’s the mining infrastructure without which crypto exchanges will grind to a halt.

The supporting infrastructure takes a lot to put up. So assuming that, one may argue that there’s some underlying “asset” behind every crypto. Besides, there’s the whole payments system oiling crypto transactions.

  • Crypto is a Hedge

Secondly, crypto lovers hold that their soaring demand constitutes value. They insist that crypto users find something of value in them, so they continue demanding them. If there weren’t anything of value to them, they wouldn’t have bothered.

Despite them not being a store of value, their increased adoption by corporates would say otherwise. Various industry luminaries share Square’s Jack Dorsey’s stand that cryptos such as BTC help hedge against monetary inflation and devaluation.

Final Thoughts

There are many things we are still learning about cryptocurrencies. One thing that is not in doubt, though, is that they are divisive. The proponents face strong objections from crypto skeptics who think them a scandalous, even fictitious creation. Their opposers have been vocal in showing what they believe to be their shortcomings and calling on the public to shun them. 

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However, things haven’t panned out that way. Despite their consistent negative campaigns against cryptos, the latter has continued to thrive. So it’s not far-fetched to imagine that some of the criticism has ended up promoting cryptocurrencies. Let’s wait to see how this duel pans out in the long run.

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