GM everyone!

This week, investment firm Bitwise fired an early shot in the Bitcoin ETF marketing wars. It launched its first Bitcoin ETF commercial. The commercial is an homage to Dos Equis beer's "The Most Interesting Man in the World" ad campaign, featuring actor Jonathan Goldsmith, which ran from 2006 to 2018.

Shortly thereafter, Bitwise released a second commercial. Investment firm Hashdex fired back with its first commercial. The Bitcoin ETF marketing war had officially begun. 🔫 

The marketing blitz is a show of confidence because the Bitcoin ETFs haven't been approved yet. They are expected to be approved around January 8th. So the investment firms seem to be betting that approval is a foregone conclusion at this point. 🥳 

As we head into the holiday season, today I'm going to walk you through the 7 most popular Bitcoin myths so you can debunk your family's misconceptions when you get together for Christmas. (Shout out to my Uncle Peter for becoming a Bitcoiner before me! 🫡 Since becoming a Bitcoiner myself, I've successfully orange-pilled my dad! 🥳 )

Next Friday, I'll give you an outlook on the year ahead. Stay tuned.

Let's get started!

1. Bitcoin is an index of money laundering

The above is a quote from Larry Fink, CEO of the world's largest asset manager Blackrock. But while Fink has come around and is now one of Bitcoin's biggest advocates, many people still think that Bitcoin and crypto assets are mainly or only used for illegal activities.

While it's true that digital currencies have been used for nefarious purposes, the same can be said of any money and many asset classes, such as real estate, art, etc.

Just recently, U.S. Senator Elizabeth Warren claimed that North Korea uses Bitcoin and crypto to fund "half" of its nuclear weapons program.

Unfortunately, facts don't matter in the U.S. political arena. Chainalysis, a blockchain analytics firm, has been studying illicit transactions for years and has consistently found that less than 2% of all cryptocurrency transaction volume is of some illicit nature. In 2022, the illicit share of all cryptocurrency transaction volume was as low as 0.24%.

2. Bitcoin isn't backed by anything

Every time someone says this, I have to stop myself from laughing because it's so ironic. The irony is that most people don't understand money.

They don't realize that currencies like the USD, AUD, or the Euro are not backed by anything and therefore will lose value over time as central banks around the world print more of them, diluting the existing supply. Take a look at the purchasing power of the US dollar over the last 100 years. 📉 

In contrast, Bitcoin is hard-coded to be scarce, which makes it resistant to inflation. There will only ever be 21 million Bitcoin. 🤘 

Not only is the supply capped, but the amount of new Bitcoin coming into circulation declines in a predictable way over time. Every four years, in an event called the halving, the rewards paid to miners are halved. These two factors keep the price of Bitcoin generally on an upward trend over the long term.

In addition, it can be argued that Bitcoin derives its value from the processing power used to validate and secure each transaction on the blockchain. Once the processing power is provided and a block of transactions is validated, the block cannot be altered.

3. Bitcoin isn't doing anything

Warren Buffett is famous for bashing Bitcoin because it "isn't doing anything".

The problem is that he looks at Bitcoin like a stock. He is looking for a cash flow, a dividend, or something else that can be delivered to the investor.

But in doing so, he completely misses the point. Much like gold, Bitcoin is not a productive asset that "does something".

Bitcoin was never meant to do anything. On the contrary, it was invented to do exactly one thing: nothing. And it's doing that exceptionally well. It is the most disciplined money in the world.

In a world of broken money, where money is constantly debased by central banks increasing its supply, Bitcoin is the best money we've ever had. It's hard-capped, it has a declining inflation rate, it's censorship-resistant. And it's made for the digital age. 👌

4. Bitcoin is a bubble

Bubbles are economic cycles characterized by unsustainable rises in market value.

However, Bitcoin has been through multiple price cycles for more than a decade - and has recovered to new highs each time. Take a look at Bitcoin's price history below. (Linear and logarithmic.)

As with any new technology, cycles are expected. Amazon's stock price dropped 92% when the so-called dot-com bubble burst in the early 2000s. However, in the decades that followed, Amazon became one of the most valuable companies in the world.

If Bitcoin were a flash in the pan, would the world's largest asset manager Blackrock (and several other asset managers) apply for a Bitcoin ETF?

5. Bitcoin will be replaced by Ethereum or another competitor

Many cryptocurrencies have promised to overtake Bitcoin. However, the world's first cryptocurrency remains the largest cryptocurrency by market cap. Bitcoin's market cap is currently more than three times that of the second-largest cryptocurrency, Ethereum.

The truth is, no other cryptocurrency has ever come close to replacing Bitcoin.

The reasons for Bitcoin's dominance include its first-mover advantage and the purity of its mission. Bitcoin is truly decentralized money. There is no CEO, no marketing department, no single point of failure. It was created by an unknown founder who then disappeared and left the project to fend for itself. Not a single dollar has ever been spent on marketing.

In contrast, all the other cryptocurrencies out there are essentially tech companies. They have founders and marketing budgets and some of them are backed by venture capital. They may have specific use cases, but if they stopped spending money on marketing, they'd be forgotten.

Bitcoin is in a league of its own. There is no second best.

6. Bitcoin will never be part of the current financial system

If you've been reading my newsletter, you know that's not true.

Bitcoin ETFs will likely be approved in the U.S. by early January. ETFs are an integral part of the financial system. They will allow retail and institutional investors to gain exposure to Bitcoin in a low-cost, tax-efficient, and fully regulated way.

Thus, Bitcoin ETFs will be the first milestone for Bitcoin to become part of the traditional financial system.

What I expect to see next is banks coming into the space and offering their clients exposure to Bitcoin, crypto, and NFTs.

When I went to the Australian Crypto Convention in Melbourne in November, there were bankers among the speakers. My takeaway was that banks are still figuring out how to custody their clients' crypto assets.

Once they figure out custody, they'll offer Bitcoin and crypto to retail investors through their trading platforms.

7. Bitcoin is bad for the environment

Bitcoin mining is energy-intensive. That's a cold fact.

According to the University of Cambridge, the most cited source for estimating Bitcoin's energy consumption, Bitcoin's annualized peak energy consumption is about 150 TWh.

Since the world consumes over 176,000 TWh of energy per year, this means that the entire Bitcoin network, at peak usage, consumes around 0.1% of the world's energy consumption. That's for a network with hundreds of millions of users and a current market cap of more than US$800 billion.

You may have heard in the news that Bitcoin consumes more energy than some countries. That's true.

But there's no point in sensationalizing this fact, because so does Google, YouTube, Facebook, Amazon, the cruise industry, Christmas lights, clothes dryers, and many other things. It's pretty arbitrary to single out Bitcoin.

I think it comes down to the question: What justifies high energy consumption?

If you think, like Warren Buffet, that Bitcoin isn’t doing anything, you'll probably think that it's a terrible idea for Bitcoin to use so much energy.

But if you think Bitcoin is the best money we've ever had, it seems justified that it uses a lot of energy.

Besides, energy consumption alone shouldn't be a problem. Life is not possible without energy consumption. The question is how the energy is generated.

Blockchain analyst Jamie Coutts reported in September that the percentage of Bitcoin mining energy coming from renewable sources has exceeded 50%.

If policymakers want to increase the percentage of renewable energy in Bitcoin mining, it's a matter of putting the right policies and incentives in place.

I'll stop here, but there's so much more to add that I'll probably do a separate issue on Bitcoin and energy in the future.

That's all for today. Have a merry Christmas, everyone! My next newsletter will hit your inbox on Friday, December 29th.

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