In the wake of the FTX exchange collapse, the European Central Bank has issued a statement taking stock of the situation of Bitcoin (BTC) and other cryptocurrencies. Entitled “Bitcoin’s last stand”, this ECB blog post destroys Bitcoin. What is it and what should we learn from it
Bitcoin “on its way to irrelevance “
After the recent collapse of the world’s former second largest cryptocurrency exchange, FTX, the European Central Bank (ECB) met with some of the world’s regulators to take stock of the cryptocurrency market and set out key points for clearer regulation.
The apparent stabilisation of bitcoin’s value is likely to be an artificially induced last gasp before the crypto-asset embarks on a road to irrelevance. TheECBblog looks at where bitcoin stands amid widespread volatility in the crypto markets.
Read more https://t.co/Hk1LuYX2de pic.twitter.com/I3Uidks8Xo– European Central Bank (@ecb) November 30, 2022
Entitled “Bitcoin’s Last Stand”, this statement has the ambitious goal of “taking stock of the state of Bitcoin”. Failing to paint the full picture objectively, the ECB offers us a zoom on the recent fall and arguments debunked many times over.
The ECB’s analysis only highlights the recent drop from $69,000 to around $17,000, but does not put it into perspective. Indeed, the cryptocurrency market has always experienced periods of significant increases punctuated by bearish phases, nicknamed bull run and bear market respectively.
However, according to analysts at the European Central Bank, Bitcoin is not likely to go back up, but will definitely go down, “which was already predictable before FTX went bankrupt” :
” For bitcoin supporters, this apparent stabilization is a sign of respite on the way to new highs. However, it is more likely to be an artificially induced last gasp before the road to irrelevance. “
The return of Bitcoin bias
In this blog post, Ulrich Bindseil and Jürgen Schaaf, Director General and Advisor to the ECB, brought out the prejudices that have already been debunked many times in the past. Starting with the fact that “BTC is hardly ever used for legal transactions”.
Moreover, despite Satoshi Nakamoto’s initial ambitions to create a decentralised global currency, the ECB believes that “bitcoin’s design and technological shortcomings make it questionable as a means of payment”:
Real transactions in bitcoin are cumbersome, slow and costly. Bitcoin has never been used in a meaningful way for legal transactions in the real world. “
Similarly, analysts have dismissed the narrative of bull and bear cycles in the crypto market out of hand. Indeed, in their view, bitcoin is not suitable as an investment either and its evolution is purely speculative:
It does not generate cash flow (like real estate) or dividends (like stocks), cannot be used productively (like commodities) or provide social benefits (like gold). The market’s valuation of Bitcoin is therefore based on pure speculation. “
Finally, the ECB insists that the regulatory attention crypto-currencies are currently receiving from lawmakers around the world can “be misinterpreted as an endorsement.” Furthermore, it warned banks against interacting with cryptocurrencies, which could damage their reputation.
