In short, bitcoin’s volatility is simply a reflection of adoption mechanisms. Since not everyone understands how it works or has accepted that it is the future of money, it remains subject to volatility, which will continue as long as its process of price discovery does not stabilize. This has not happened yet, because on the one hand, not all bitcoins have been issued, nor has it been adopted en masse yet. What happens when all bitcoins have been issued and more and more people and entities become aware of its value proposition? Its use increases, the value-setting process converges, and it becomes valuable as a transactional currency. We are, quite simply, witnessing that process in real time.
At the New York Times’ DealBook DC Policy Project today, the US Treasury secretary reiterated to journalist Andrew Ross Sorkin that she’s no big fan of Bitcoin, this time taking aim at its energy consumption and potential use for illicit financing.
“I don’t think that Bitcoin is widely used as a transaction mechanism,” Secretary Yellen said in response to a question about whether the Treasury Department needed to be paying more attention to the asset.
“To the extent it’s used, I fear it’s often for illicit finance.”
The illicit finance line is an old saw, but it isn’t backed up by much in the way of hard data, said Anderson Kill partner Hailey Lennon for Forbes last month.
According to blockchain tracking firm Chainalysis, criminal activity accounted for 0.34% of cryptocurrency transaction volume, down from 2.1% in 2019.