There’s a meme in the bitcoin world that goes "this is good for bitcoin". No matter what happens, the price drops, an exchange goes goes down, China bans crypto: "this is good for bitcoin". The rationales might include: this will flush out the "weak hands", this will bring better exchanges and teach people to not hold crypto on an exchange, this will force the west to take an opposing stance.
Sometimes however, this tongue-in-cheek attitude is helpful when reading negative news about cryptocurrency or arguments criticizing it, and to recognize the positive that is hidden in the criticisms.
Let’s look at a recent article in the Wall St Journal, “Most Bitcoin Trading is Faked", which reports that nearly 95% of all trading in bitcoin is artificially created by unregulated exchanges.
This is according to a report by Bitwise Asset Management, in its submission to the SEC for an ETF, that says it won’t be susceptible to fraud and manipulation, because Bitwise will only reference the 5% of trading that's legitimate.
There’s another research firm Crypto Integrity that puts the number at 88% illegitimate, and another researcher TIE puts the number at 75%.
This all sounds bad until you consider that this article is referencing 3 firms that are analyzing bitcoin trading patterns, and that they are using data from 81 bitcoin exchanges (in Bitwise’s case) from around the world. The fact that there are multiple such firms analyzing bitcoin trading activity, and there are so many exchanges should highlight bitcoin’s popularity. Coinmarketcap lists 223 exchanges, and in actuality there are more than twice that. Also the fact that this was for an ETF proposal to the SEC (in a long line of ETF submissions) should be recognized as something positive.
The article says most volume is "questionable" and over a 4 day period in March only $273 million was legitimate. That's not an insignificant number considering crypto is in a bear market where trading is only a small fraction of what it was early last year.
Another example: you may regularly read articles criticizing the amount of energy bitcoin mining consumes. How can that be good? Well, in another article this past weekend in The Wall St. Journal, "Bitcoin, Powered by Cheap Gas", it describes mining as "a perfect marriage between supply and demand," with "power [coming] from natural gas with nowhere to go".
The article goes on to say how the market is "awash in [natural gas], to the point where some North American producers are paying people to take it away. In parts of Texas, natural gas is now going for less than nothing."
The problem is that these natural gas deposits are hit when extracting crude oil, and it's economically impractical to transport the gas from these remote areas. Instead producers just let the gas vent off or burn it, as least to the limits allowed by law. When they hit that limit, they often shut down the well.
With bitcoin there’s another solution. Run bitcoin miners which are hungry for that energy and earn bitcoins in return. Oil producers are setting up shipping containers packed with mining rigs next to their wells.
"I knew about all the wasted energy that goes on," says Stephen Barbour, a consultant for oil field companies. "Reading about bitcoin mining and how it could monetize energy through the internet, I just thought that was unbelievable."
This is good for bitcoin.
About the author
Dr. Lederer has over 15 years of technical experience in computer system design and programming. He has been teaching about blockchain and Ethereum for 3 years and recently co-authored Blockchain: A Practical Guide to Developing Business, Law, and Technology Solutions. Prior to working on blockchain technology, he worked at The Wall Street Journal, Morgan Stanley and BAE Systems, where he held a DoD TS (top secret) clearance to develop a novel mobile ad-hoc network for the US Air Force.