Ark Investment, a major shareholder of Tesla, expresses dissatisfaction with Goldman Sachs' bearish view on Bitcoin, presenting a lengthy article outlining five counterarguments.

Bitcoin has attracted many globally renowned investors this year, including the author of "Rich Dad Poor Dad," Paul Jones, and recently, Ark Investment Management, a prominent Tesla supporter, has also shown great confidence in the future of Bitcoin. They have released a special report "Debunking Common Bitcoin Myths" to explain the areas where traditional investors most commonly misunderstand Bitcoin.

Earlier reports stated that Goldman Sachs, during a conference call in May, dismissed Bitcoin as an asset class. Besides causing dissatisfaction among the cryptocurrency industry, Ark Investment Management also strongly disagrees with Goldman's statement, believing that there are already too many similar misunderstandings. They emphasize the importance of Bitcoin in a diversified investment portfolio:

Some influential financial research institutions refute Bitcoin based on outdated information, inconsistent arguments, and flawed analysis.

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1. Bitcoin's volatility is too high to be used as a store of value

Ark Investment Management pointed out that many claim Bitcoin's volatility is too high for it to be a desirable asset due to the daily price fluctuations. However, these individuals fail to understand why Bitcoin is volatile and why this volatility may decrease in the future.

Ark uses the Trilemma Theory to support its argument. The theory suggests that when formulating monetary policy, three objectives (fixed exchange rates, free capital flow, and policy independence) can only satisfy two of the three goals simultaneously, making it impossible to achieve all three objectives, including: 1. monetary policy independence; 2. exchange rate stability; 3. capital mobility.

A. The Bretton Woods system (USD) achieved fixed exchange rates and independence in national monetary policies but restricted capital flow.

B. The gold standard system achieved fixed exchange rates and capital mobility but sacrificed "monetary policy independence," leading to an uncontrolled increase in the money supply.

Ark points out:

Based on the Trilemma Theory, one can understand why Bitcoin's volatility is a natural outcome. Unlike central banks, Bitcoin does not prioritize exchange rate stability, restricts the growth of the money supply, and allows for free capital flow. Its price is based on the function of demand and supply, hence its volatility is not surprising.

As adoption increases, Bitcoin's price volatility decreases.

2. Is Bitcoin a Bubble?

Economists like Dr. Nouriel Roubini continuously argue that Bitcoin is in a bubble, lacking intrinsic value, with price increases based on the willingness of the "greater fool" to buy at a higher price. In response, Ark Investment Management stated:

Bitcoin's value lies in appreciating over the long term with effective preservation, making it, in a sense, an efficient asset that attracts more participants. In other words, money is a collective consensus; it holds value because people believe it does. Extending this argument, it indicates that money is not confined to any form. For thousands of years, due to scarcity, fungibility, and durability, economists have regarded gold as the most successful form of money.

3. Bitcoin's Open Source Nature Leads to Forks and Clones, Diluting Value

As the Bitcoin protocol is publicly available, anyone can view its code and create other versions of Bitcoin, including various existing forked coins in the market, leading skeptics to believe that these actions will dilute Bitcoin's value.

Ark Investment Management emphasizes that these clones do not impact Bitcoin's scarcity. Just as hyperinflated Venezuelan fiat currency cannot buy more US dollars, forked coins cannot increase Bitcoin's limit of 21 million coins. They use the example of Facebook to illustrate:

After a fork, why is Bitcoin more valuable compared to Bitcoin Cash (BCH)? We assume if Facebook were also an open-source project, it could "fork" and replicate the value of its 2.6 billion users and 50,000 employees. The value of this cloned Facebook comes from the network effect of the original Facebook, not from the existence of the copied version itself.

In addition to refuting common misconceptions about Bitcoin, Ark Investment Management also addresses accusations such as "Bitcoin being commonly used for illegal activities" and "wasteful energy consumption."

Ark mentions Bitcoin's neutrality, allowing anyone to transact. While this stance does not distinguish criminals, its publicly transparent ledger allows scrutiny of all suspicious activities. Furthermore, other inventions like the telephone, automobile, and internet are no less effective in facilitating criminal activities compared to Bitcoin.

Furthermore, many critics argue that Bitcoin's computational efficiency is low and cannot scale, but Ark points out the opposite, believing that Bitcoin's impact on the environment is minimal. Various renewable energy sources, especially hydroelectric power, play a significant role in Bitcoin's energy structure. Ark cites Nic Carter, the founder of research institution Coin Metrics, stating:

In the pursuit of the cheapest power, miners will continue to flock to regions offering abundant renewable resources, releasing stranded energy assets and seeking power demands below the current production cost. From a climate perspective, Bitcoin mining will have a positive impact.

Ark Investment Management's report is evidently a response to Goldman Sachs' previous dismissal of Bitcoin. Ark believes that Bitcoin's complexity should not deter financial institutions from conducting in-depth analysis and hopes this research will stimulate discussions in the institutional investment community. As the Bitcoin network matures, Ark also believes that Bitcoin will solidify its position as an emerging asset and prompt financial institutions to take Bitcoin more seriously in the future.