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Debunking the accuses on bitcoin

A couple of days ago, Janet Yellen, the nominee for US treasury secretary, said: "I think many [cryptocurrencies] are used — at least in a transaction sense — mainly for illicit financing, and I think we really need to examine ways in which we can curtail their use and make sure that money laundering doesn't occur through those channels."

Last week, Christine Lagarde, President of European Central Bank, said:" [Bitcoin is] highly speculative asset which has conducted some funny business and some interesting and totally reprehensible money laundering activity."

Reality is quite different. According to Chananalytics 2021 Crypto Crime Report, just 0.34% of all cryptocurrency activity is related to criminal activity. Huge drop from previous year 2.1%. According to United Nations Office on Drugs and Crime:" The estimated amount of money laundered globally in one year is 2 - 5% of global GDP, or $800 billion - $2 trillion US dollars." In this context, cryptocurrencies are way ahead of traditional finance and cash transactions.

According to the DeCrypt article, Gerald Moser, Chief Market Strategist at Barclays Private Bank, thinks that Bitcoin is almost 'uninvestable' due to the high volatility. I believe that is the same where Christine Lagarde points by saying' highly speculative asset.'

I would expect that they know that the volatility is not necessarily bad. The Sharpe Ratio is the most widely used method to measure risk levels caused by volatility. Here is the chart from Woobull Charts that compares Bitcoin and other asset classes Sharpe Ratios. A higher ratio means lower risk.

In 2016 many of my friends start investing in Bitcoin. I thought there were way too many risks at that time, but actually, I just not studied it. Back then, if someone has shown that chart to me, I probably was studied it much more closely. If you want to read more, here is a link to the Iconic Funds study on the impact of a minor crypto-asset allocation with rebalancing to various portfolios.

In the end, numbers don't lie; as you can see in the chart above, bitcoin has been maybe the best investment in the last ten years if we look at the most risk-free assets in the market. Not to mention that it also has been most profitable. And what comes to money laundering accuses, the numbers are again right. 0.34% against the traditional banks 2 to 5% volumes are backing up the bitcoin. Is there anything else someone wants to blame bitcoin?

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