Bank of America’s Hit Piece on Bitcoin

Is Bitcoin dirty?This month Bank of America Global Research issued a 49-page report on Bitcoin titled “Bitcoin’s Dirty Little Secrets” that comes across as a hit piece.It has five main sections:What drives Bitcoin prices? 12 pagesHow does Bitcoin compare to traditional portfolio assets? 9 pagesHow does Bitcoin score on ESG? 11 pagesAre CBDCs Kryptonite for crypto? 6 pagesIs DeFi potentially more disruptive than Bitcoin? 7 pagesRight on page 1, the executive summary, the plan of attack is laid out clearly (italics mine):“Bitcoin supply is artificially scarce, demand drives prices”“No good reason to own BTC unless you see prices going up”“Our Bitcoin ESG read: low on E, mixed on S and G”“CBDCs are kryptonite for crypto, but DeFi is intriguing”These follow the outline, with the last statement collapsing the last two sections.So let’s look at these in turn.“Bitcoin supply is artificially scarce”I object, as does the Bitcoin community, to the term “artificial.” The scarcity is by design. It is a deliberate feature, not a bug. For money to fulfill the store of value requirement, it must be scarce. Indeed Bitcoin’s “minting” or “mining” or emission schedule was designed with two main principles: unlike fiat currency, the supply must be finite.Last year the M2 money supply of the US dollar increased by 26%. In a single year. The money supply has been increasing every year, but 2020 set a new record since the Federal Reserve was created over a century ago. This was largely in response to COVID-19, typically in recent years, the supply has grown in the range of 4 to 10% since the Great Recession. However, the outlook in the next few years is for significant fiscal stimulus and large deficits, which will push M2 growth higher than during the prior decade.The M2 money supply grew by 26% in 2020…