Photo by European Central Bank on Flickr.com
The European Central Bank harshly criticized Bitcoin. Bitcoin and other cryptocurrencies are rapidly approaching the end of their days, according to the European Central Bank.
Bitcoin’s value peaked at $69,000 in November 2021 and hit $17,000 in mid-June 2022. Since then, Bitcoin has continued to fluctuate around $20,000. The European Central Bank, on the other hand, harshly criticized cryptocurrencies, stating that Bitcoin is now breathing its last breath.
The European Central Bank (ECB), one of the most important central banks in the world and responsible for managing the monetary policy of 19 countries in the Eurozone, shared a blog post titled “Bitcoin’s Last Stand.”
While Bitcoin experts have described the signs of recovery in recent weeks as “a respite on the way to new highs”, European Central Bank chief executive Ulrich Bindseil and analyst Jürgen Schaff describe it as “the last breath of artificially incentivized.”
“Bitcoin is not an investment or payment tool”
The blog post by Bindseil and Schaff also touches upon the history of Bitcoin. It is stated that Bitcoin was created to overcome the current monetary and financial system and is marketed as a global, decentralized digital currency. However, “Bitcoin’s conceptual design and technological shortcomings make it questionable as a means of payment,” it explains.
Bindseil and Schaff said that Bitcoin does not fit the investment mold, let alone as a means of payment: “Bitcoin is not suitable as an investment either.” It does not generate cash flows (like real estate) or dividends (like stocks), cannot be used productively (like commodities), or generate social benefits (like gold). Bitcoin’s market cap is therefore pure speculation.
The ECB’s blog post also underlined that speculative bubbles are based entirely on new hot money flowing.
On the other hand, analysts say that the bankruptcy of FTX will likely accelerate the regulation of digital currencies. In the European Union, a new law called Crypto Asset Markets, or MiCA, is expected to harmonize the regulation of digital assets across the world.
The shared blog post also acknowledges that Bitcoin has a high transformation potential as it is based on new technology (DLT/Blockchain). It is stated that although the relevant financial institutions (banks, insurance companies, payment services, asset managers, etc.) are still unable to reach an agreement on the legal arrangements to be made, this will increase confidence.
Bitcoin and cryptocurrencies are harmful to the environment
In the blog post, the environmental damage of Bitcoin and other cryptocurrencies was also included, and it was stated that they were at an “unprecedented level.” It should be noted that only Bitcoin mining consumes the same amount of electricity as Austria in a year. The technical underpinnings of cryptocurrency require enormous amounts of computing power to verify and confirm new transactions. Bindseil and Schaff explain it this way: “A Bitcoin transaction consumes hardware comparable to that of two smartphones.” The entire Bitcoin system generates as much e-waste as the whole of the Netherlands. This inefficiency of the system is a feature, not a flaw. “It is one of the features that guarantees the integrity of the completely decentralized system.”
It is stated that due to all the negatives mentioned above, Bitcoin and other cryptocurrencies will be “lost in apathy.”
On the other hand, this attitude of the ECB, or European Central Bank, towards cryptocurrencies is not new. ECB President Christine Lagarde said in May that cryptocurrencies “have no value.” Also, former board member Yves Mersch described Bitcoin as “a combination of a bubble, a pyramid scheme, and an environmental disaster.”