From Morningstar:

Retail investors are intrigued by Bitcoin but should be cautious due to its extreme volatility and potential criminal ties. In addition, the energy-intensive process of Bitcoin mining is contributing to environmental concerns and spillover effects for surrounding communities.

Bitcoin mining uses as much energy as countries like the Netherlands or the Philippines, complicating the push for reducing carbon emissions. The method involves guessing random numbers with hundreds of computers, which contributes to its energy intensity.

Bitcoin mining has been associated with noise pollution in communities and a spike in electricity costs for local residents due to high grid demand. However, not all cryptocurrencies use the energy-intensive proof of work method, and Ethereum has shifted to a different consensus mechanism.

Europe is ahead of the UK in regulating cryptocurrencies, and the US has recently approved Bitcoin spot exchange-traded funds. Bitcoin has been synonymous with “criminal currency,” but transparency of transactions makes it less effective for criminal activities.

The fall of Sam Bankman-Fried and the collapse of FTX highlight governance failures and the need for regulation to curtail abuses. The contradictions between centralization and decentralization in cryptocurrencies raise concerns about their long-term efficiency and the potential for evading oversight to avoid compliance costs.



Read more: Bitcoin: is it Ungovernable? | Morningstar