Bitcoin rides a roller coaster, the US Treasury Secretary warns: “Extremely inefficient”

"In a way, I worry that it is often used for illegal financing."

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U.S. Treasury Secretary Yellen warned on Monday about the possible dangers Bitcoin poses to investors and the public. Although Bitcoin began to plummet this week, the price of the cryptocurrency is now below $50,000 as against the $54,000 it last week.

In an interview with CNBC reporter on Monday, she said that she does not believe that Bitcoin has been widely used as a means of transaction. “To some extent, I am worried that it is often used for illegal financing. This is an extremely inefficient transaction method, and the energy consumed in processing these transactions is amazing,” the former Fed chairman said.

Mining Bitcoin requires users to use high-performance computers to solve complex mathematical equations and consumes a lot of power. According to Digiconomist’s data, the annual carbon emissions generated by this process are equivalent to the carbon emissions of entire New Zealand.

Yellen also said: “This is a highly speculative asset, and people should be aware that its volatility may be very large, and I do worry about the potential losses that investors may suffer.”

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According to data from Coin Metrics, Bitcoin plummeted by more than 10% in early trading on Monday, Eastern Time, to as low as $47,700 at one time, but then rebounded. As of 5:13 pm, the price of the cryptocurrency has rebounded to $54,647. Currently, the bitcoin price is resting at $48,000.

Bitcoin rides a roller coaster, the US Treasury Secretary warns: "Extremely inefficient"
Screenshot of Coin Metrics.

Last Saturday, Tesla CEO Elon Musk said that the price of Bitcoin appeared to be too high. It is worth pointing out that for Bitcoin, price fluctuations of more than 10% are not uncommon. Bitcoin once rose to nearly $20,000 in 2017 but dropped by 80% in 2018.

In the past six months, the price of Bitcoin has risen by approximately 350%. So far this year, Bitcoin has risen by more than 80%. Last Friday, the market value of Bitcoin touched $1 trillion for the first time.

And on Sunday, Bitcoin set a new record high, the price once soared to 58350 US dollars. The price of 1 Bitcoin surpassed the price of 1 kg of gold for the first time in history.

Analysts said that the support of several large Wall Street banks and Fortune 500 companies promoted this round of Bitcoin’s rise.

Mastercard credit card company said last week that it plans to support certain digital currencies on its payment network this year. The oldest bank in the United States and the Bank of New York Mellon, known for its custody business, also announced that it will launch a digital asset department later this year to provide customers with storage and transfer services for bitcoin and other digital currencies.

Another payment giant PayPal stated that it plans to provide encryption services to holders of the company’s Venmo wallet by the third quarter and plans to expand its existing cryptocurrency business to a wider international market.

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Beginning in October last year, PayPal announced that it would allow users to buy, hold, and sell cryptocurrencies, and use digital currency for shopping in PayPal’s retail network, but this service is limited to the United States.

Musk also recently publicly expressed his support for this virtual currency, saying that Bitcoin is a “good thing”, and he believes that Bitcoin will soon be accepted by more traditional financial professionals.

Earlier this month, Tesla announced that it had purchased $1.5 billion worth of bitcoin and would accept bitcoin as a payment method for purchasing its products.

Dan Ives of Wedbush Securities pointed out that the electric car manufacturer has already made about $1 billion in book profits from Bitcoin investments, a figure that will even be higher than that of 2020. The company’s proceeds from the sale of electric vehicles in 2009.

Part of the reason why Bitcoin is receiving more and more attention from mainstream investors is that the latter regard it as a means of storing value similar to gold. Bitcoin bulls believe that investors should include this cryptocurrency in their investment portfolios to hedge against potential inflation.

But many people are skeptical. JPMorgan analysts stated in a report last week that Bitcoin is only a small economic event, and the rise of digital finance (not Bitcoin) is the real financial transformation story in the era of the new crown pneumonia epidemic.

Yellen pointed out the issue of digital currency regulation. She said at the previous roundtable on innovation policy of the financial sector of the U.S. Department of the Treasury: “The abuse of cryptocurrency and virtual assets is a growing problem.”

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“I see the prospects of these new technologies, but also the reality: cryptocurrencies have been used by online drug traffickers to launder money; they have also become tools for financing terrorism,” she added.

Therefore, Yellen pointed out that it is important to ensure that it is not used as a means of illegal transactions and that the institutions that supervise Bitcoin transactions adhere to their supervisory duties.

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