Bank of America Slams Bitcoin, the Crypto Community Reacts
Key Takeaways:
- Bitcoin bashed by Bank of America in a 50-page report
- The bank faces strong backlash from the crypto community
Bank of America’s Global Research
Bank of America, a top US investment bank, recently published a 50-page report dedicated to criticizing Bitcoin. The report, called “Bitcoin’s Dirty Little Secrets”, presents a damning indictment of the world’s largest cryptocurrency. Bitcoin, which has grown nearly 15 times in value over the past 12 months, is seen by analysts of Bank of America as “impractical as a payments mechanism or even as an investment vehicle”.
The devastating report by Bank of America’s Global Research team is a deviation from the recent trend in which major US banks jump on the crypto wagon. The research note describes some well-known facts, for example, the recent price appreciation is a result of institutional investors injecting fresh liquidity into bitcoin’s market capitalization. Some statements, however, cast some negative light on the digital asset. There is “no good reason to own bitcoin unless you see prices going up”, the analysts say, while also adding “the main portfolio argument for holding bitcoin is not diversification, stable returns, or inflation protection, but rather a sheer price appreciation, a factor that depends on bitcoin demand outpacing supply”.
Bitcoin as an Inflation Hedge
On the topic of bitcoin functioning as a hedge against inflation, Bank of America strategists note that due to its fixed supply, “bitcoin’s inflation hedging benefits are not particularly apparent”. In addition, the report argues that bitcoin does not offer diversification benefits.
The investment bank highlights that bitcoin’s volatility is higher than that of foreign exchange trading or gold trading. At current prices, it takes $93 million of net inflows for bitcoin to move 1%, whereas gold would require $1.86 billion for a similar move.
Crypto Enthusiasts Bite Back
The scathing report was not well received by crypto supporters who took to Twitter to express how they felt about the recent criticism of bitcoin. “If your stonk chart looks like this, you don’t get to call Bitcoin volatile,” said one person, citing the high volatility of Bank of America shares, which at one point lost over 90% of their value. Another bitcoin proponent argued that “Bank of America has a higher chance of failing than Bitcoin”, to which CZ, CEO of the largest crypto exchange Binance, added that “all banks” would fail before Bitcoin did.