The second-largest bank in the US, Bank of America, slammed Bitcoin in a recent note to clients and questioned the environmental implications of maintaining the asset. According to The Street report titled “Bitcoin’s Dirty Little Secrets,” argued that Bitcoin had little role to play in an investor’s portfolio. “Bitcoin has also become correlated to risk assets; it is not tied to inflation and remains exceptionally volatile, making it impractical as a store of wealth or payments mechanism,” the bank said.
“Bitcoin prices could be manipulated.”
The report further claimed that Bitcoin prices could be manipulated upwards with a relatively small amount of money. It said that just $93 million in fund inflows could trigger a 1% price increase (a $580 move) for Bitcoin, while doing the same for gold would take over $1.86 billion. According to Bank of America, this is likely due to the concentration of Bitcoin. Over 95% of the total mined bitcoins are controlled by the top 2.4% of addresses with the largest balances, the note claimed, stating such ownership created a social issue for new investors.
The Bank of America also raised concerns about bitcoin mining’s environmental impact.
The Bank of America note also raised concerns about the huge energy consumption required for Bitcoin mining. Bitcoin mining is an energy-intensive process that requires massive computing rigs—and the corresponding hardware to cool down such machines—to process transactions and maintain the network. A lot of carbon dioxide is emitted as a byproduct of crypto mining, meaning it isn’t an environmental-friendly process. The note said, “A $1 billion fresh inflow into Bitcoin may cause CO2 to rise by the equivalent of 1.2 million cars.” It added that since most Bitcoin was mined in China, the sector was directly “linked” to fuel resources in China.