On Wednesday, November 30, 2022, a blog post published by the European Central Bank (ECB) discusses bitcoin and authors Ulrich Bindseil and Jürgen Schaaf seem to believe this is bitcoin’s “last stand”. The ECB authors further claim that while the price of bitcoin has consolidated and stabilized, central bank officials have remarked that “this is an artificially induced last gasp before the path of no -relevance”.
Members of the European Central Bank Believe They Predicted Bitcoin Would Head to “Irrelevance” Before FTX Failed
Two members of the European Central Bank, Ulrich Bindseil, the Director General of the ECB’s Market Infrastructure and Payments Division, and Jürgen Schaaf, an advisor to the ECB’s Payments Sector, published a blog post on the primary cryptographic asset bitcoin (BTC).
The ECB blog post is titled “Bitcoin’s Last Stand“, and the authors argue that the crypto asset becomes irrelevant. Bindseil and Schaaf explain that BTCThe price of is down 76% from the all-time high of $69,000, and the authors noted that bitcoin proponents believe BTC takes a “pause on the way to new heights”.
The ECB authors do not think that will be the case this time around. “More likely, however, this is an artificially induced last gasp before the road to irrelevance,” the authors of the ECB blog insist. “And that was already predictable before FTX went bankrupt and sent the price of bitcoin well below $16,000.”
Members of the European Central Bank further believe that “bitcoin has never been used in any meaningful way for legal transactions in the real world.” The ECB blog post adds:
Bitcoin is also not suitable as an investment. 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 valuation of Bitcoin is therefore based solely on speculation.
ECB Officials Say Banks Promoting Bitcoin Carry ‘Reputational Risk’, Blog Post Insists Regulation Doesn’t Mean ‘Approval’
The authors don’t necessarily use the terms, but Bindseil and Schaaf associate bitcoin with a Ponzi or pyramid scheme, as the authors point out that “speculative bubbles depend on the influx of new money.”
“Big bitcoin investors have the most incentive to keep the euphoria going,” the blog editors insist. While regulatory policy has developed around cryptocurrency assets, the two ECB officials believe that “regulation can be misinterpreted as approval.” Bindseil and Schaaf aren’t too keen on the idea that the crypto space should be allowed to innovate “at all costs”.
According to the ECB authors, the innovative value of Bitcoin is very low compared to the risks that would outweigh the innovation. The ECB document states:
First, these technologies have so far created only limited value for society, regardless of expectations for the future. Secondly, the use of a promising technology is not a sufficient condition for the added value of a product based on it.
Finally, central bank officials believe that banks that promote bitcoin will bear reputational risk. ECB members say that because they believe bitcoin is not a suitable investment or payment system, “it should not be treated as either in regulatory terms and should not therefore not be legitimized”.
Bindseil and Schaaf’s blog post is very similar to the opinions of people like Peter Schiff, Charlie Mungerand the hundreds of so-called bitcoin obituaries published over the years. Despite the ECB’s advice, many individuals, academic articles and companies strongly disagree with the two central bank leaders.
Global blockchain leader at EY, Paul Brody, recently said that this crypto winter is a “much milder crypto winter than the previous one”. Brody also said that crypto price fluctuations have much less impact on industry growth these days. “For the first time ever, price increases and decreases don’t have such a big impact on the long-term growth of the industry,” Brody said.
Additionally, a paper published by Harvard Ph.D. Matthew Ferranti. candidate in economics, says banks should hold some bitcoin. Ferranti said even central banks should consider holding bitcoin, and more specifically, central banks facing financial sanctions based on the financial institution’s accessibility to gold reserves.
What do you think of the ECB’s blog post on Bitcoin’s so-called ‘last stand’? Do you agree with European Central Bank officials? Let us know your thoughts on this in the comments section below.
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