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Bitcoin extremists consider the world’s first cryptocurrency to be a near-perfect monetary instrument, free from artificial manipulation by central banks and reflecting market forces in an authentic form. Given the scarcity of the baked-in supply, bitcoin is often described as digital gold. However, key officials at the European Central Bank (ECB) have now launched barbs against the cryptocurrency, targeting bitcoin’s legendary volatility.
The apparent stabilization of Bitcoin’s value is likely to be the last artificially induced moments before the crypto-asset embarks on an irrelevant path. #TheECBblog It looks at where Bitcoin stands amid widespread volatility in the cryptocurrency markets.
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– European Central Bank (ECB) November 30, 2022
The Director General of the Directorate General for Market Operations at the European Central Bank, Ulrich Bindsel, has authored a blog post on Bitcoin in collaboration with advisor Jürgen Schaff. This post takes a no-holds-barred approach to the world’s largest cryptocurrency by market cap.
According to the contents of the blog post, ECB officials believe that the current period of relative stability in the value of Bitcoin, as marked by its fluctuations in the $15,000 to $20,000 price range, is just a prelude to the ultimate destruction of the cryptocurrency:
For bitcoin supporters, the apparent stability signals a break on the road to new heights. However, it is more than likely that these last moments were artificially induced before the path to inadequacy – and this was already expected before the FTX crash sent the price of bitcoin well below $16,000 USD.”
Then the ECB officials go on to make three main points. First, Bindseil and Schaff state that Bitcoin is rarely used in fiat transactions and that the cryptocurrency represents a Ponzi scheme of sorts where the “big Bitcoin investors” have all the incentive in the world to keep the gravy train flowing.
Interestingly, Bindseil and Schaff did not provide any information regarding the percentage of transactions on Bitcoin that they consider illegal. They also avoided doing a comparative analysis with fiat-based currencies on this scale.
Secondly, ECB officials apparently believe that just because governments around the world enact regulations on cryptocurrencies, they do not automatically legitimize this nascent sector.
“The current regulation of cryptocurrencies is shaped in part by misconceptions. It remains the belief that room should be given to innovation at all costs.”
The post then proceeds to scold Bitcoin for being an “unprecedented polluter” by consuming as much electricity annually as Austria. This, however, is a false equivalence. As we have noted time and time again, a large portion of bitcoin mining is now done using renewable energy resources. Moreover, Bitcoin still consumes only a small part of the energy of the global financial industry.
Then, Bindseil and Schaff ended their blog post by warning banks about the reputational risks that supposedly result from dipping into cryptocurrency:
“The financial industry should be wary of the long-term damages of promoting Bitcoin investments – despite the short-term profits they can bring (even without being in the game). The negative impact on client relationships and reputational damage for the entire industry could be massive once Bitcoin investors incur More losses.”
Do you think the European Central Bank is now taking a stand against Bitcoin? Let us know your thoughts in the comments section below.