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The European Central Bank is lying about Bitcoin or lying to itself
On Thursday, the European Central Bank (ECB) published a blog repeating debunked claims about bitcoin {{BTC}}. The world’s first and largest cryptocurrency, according to ECB Director General Ulrich Bindseil and advisor Jürgen Schaaf have failed as a currency and an investment. And therefore, its fair value is “zero dollars”.
In other words: the central bank of the world’s largest trading bloc cannot recommend Bitcoin because it’s going to crash.
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“The latest approval of an ETF does not change the fact that bitcoin is not suitable as a means of payment or as an investment,” Bindseil and Schaaf wroteReferring to Bitcoin Spot Exchange Traded Fund Fleet which went live in the United States in January, which have so far significantly exceeded analysts’ forecasts.
If it seems odd for the ECB to comment on Bitcoin, that’s probably because the authors also feel the same way. Crypto mood change, and see a potential rally on the horizon after the successful launch of ETFs and the lifting of crypto winter. Bitcoin price has more than doubled to over $51,000 in the past six months, according to CoinDesk Indices.
“For society, a new Bitcoin boom and bust cycle is a dire prospect. And the collateral damage will be massive,” they write, later adding that “Bitcoin’s price level is not an indicator of its sustainability.” Still, it is impossible for the authors not to acknowledge recent gains, even if they predict that one day the “speculative bubble” will burst.
“The fall 2023 rally was sparked by the prospect of an imminent reversal in interest rate policy from the US Federal Reserve, the halving of BTC mining rewards in the spring [2024] and later, the SEC’s approval of the Bitcoin Spot ETF,” write Bindseil and Schaaf. It’s an interesting move to reverse time to try to explain what “initiated” the Bitcoin rally Considering these three factors – rate cuts, halving and ETFs – are still in play.
See also: Bitcoin ETFs See Record Weekly Inflows of $2.4 Billion
Despite these economic factors, the authors argue that bitcoin “is still not suitable as an investment” because it lacks cash flow, dividends, productive business uses or “social benefits” and that interest in the asset is primarily a matter of FOMO and “the effectiveness of the Bitcoin lobby.”
Why exactly have Bitcoin boosters been so effective over the years? Why are stablecoins being adopted quickly in countries experiencing hyperinflation? Why is Bitcoin attractive to Americans and Europeans? These are questions that are not being asked, perhaps because over the last decade the euro has lost 99.5% of its value compared to bitcoin, according to TradingView data.
The story continues
It’s not even the first time the ECB predicted the demise of bitcoin. In 2022, Bindseil and Schaaf wrote that a move from $17,000 to $20,000 in the weeks following FTX’s collapse was a “dead cat bounce” and “one last artificially induced burst before the road to irrelevance.” While it is true that it took a long time for bitcoin to regain ground, bitcoin now appears ready to retest its all-time high around $69,000.
I am not at all willing to think about why people are interested in cryptocurrencies (for example, not once have the words been said high inflation, savings or fees mentioned), Bindseil and Schaaf further argue that any increase could likely be explained by “price manipulation” and fraud. They cite a Forbes study of 2022 which found that 51% of reported bitcoin trading volumes were likely falsified, a study I might add that does not make Bindseil and Schaaf’s mistake of confusing price and volumes.
But the authors can’t help but view bitcoin as a criminal enterprise — drawing connections between disparate events to suggest that misuse anywhere means abuse everywhere. At one point, they discuss how the U.S. Securities and Exchange Commission’s Twitter/X the account was hacked to post fake news on Bitcoin ETFs, for example. (Maybe it’s just me, but I think this has a more negative impact on the SEC than the Bitcoin network.)
So much so that the ECB is either intentionally lying or genuinely wrong about the criminal use of bitcoin, a long-standing claim that has been refuted time and time again. Without citing a source, the authors write: “Despite the market slowdown, the volume of illicit transactions continued to increase. ” All evidence availableincluding Chainalysis’s annual crime reports, suggest that crypto crime decreases in market downturns.
See also: Crypto Money Laundering Dropped 30% Last Year: Chainalysis
Furthermore, the claim that bitcoin “remains the first choice for money laundering in the digital world” is demonstrably false. It may be unfair to compare bitcoin to the global reserve currency, the US dollar, which dominates global and online crime, but why again the 500 euro note banned?
Later, the authors directly contradict themselves by discussing precisely why Bitcoin is losing favor with criminal users: because it is run on an immutable, completely public, and transparent ledger. “Therefore, Bitcoin is a cursed tool for anonymity, facilitating illicit activities and leading to legal action against violators through transaction tracing,” they write.
The only thing the authors may have gotten right was when they stated that “the decentralized nature of Bitcoin presents challenges for authorities, sometimes leading to unnecessary regulatory fatalism.” Certainly, Bitcoin exists for a reason – whether they want to review it or not – but that doesn’t mean that use of this network can’t be regulated appropriately.
The ECB would be better off doing just that, rather than predicting the death of Bitcoin for the thousandth time.