The European Central Bank is painting a very pessimistic outlook for Bitcoin (BTC/USD), noting that the flagship cryptocurrency is now at its “last stand” and could be on its way to “irrelevance.”
As to the why of this outlook, the ECB points to Bitcoin’s crash from (highs of $69,000 reached in November 2021, to lows of $16,000 – after the collapse of Terra LUNA in May and crypto exchange FTX last month.
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To crypto proponents, the crypto winter will eventually give way to a new bull run that sees prices hit new highs. This is because of the exit of weak hands amid the massive accumulation under and around $20,000.
For the ECB though, any surge in price from now won’t be because of the cryptocurrency’s value but purely driven by speculation.
According to the bank, Bitcoin is not just unsuitable for payments, it’s also not worthy as an investment. For one, BTC doesn’t generate cash flow as does real estate or dividends as is with stocks. Bitcoin also has no productive value like commodities or does it offer social benefits as is the case with, say, gold.
In short, Bitcoin’s market valuation is directly based on speculation.
Retail investors are being misled
Whie the ECB says Bitcoin’s bubble is already popped, it notes the speculation and misconceptions about regulatory developments and entry of financial players is giving undue legitimacy to the crypto industry. The central bank suggests that such a perspective does not just hurt investors, but also threatens a reputational risk for involved banks.
“Since Bitcoin appears to be neither suitable as a payment system nor as a form of investment, it should be treated as neither in regulatory terms and thus should not be legitimised. Similarly, the finance and banking industry should be wary of the long-term damage of promoting Bitcoin investments – despite short-term profits they could make (even without their skin in the game).”
Bitcoin’s hovering at around $17,000 after crashing hard since hitting that all-time high.
There have been 467 Bitcoin obituaries so far
While not the first, this is the most aggressive attack on Bitcoin from the ECB so far.
As Invezz previously reported, Executive Board Member Fabio Panetta said in April that crypto’s bubble had burst, threatening the whole financial ecosystem in what could be worse than what happened during the 2008 financial crash.
But it’s also not the first time Bitcoin has been declared dead. Since its inception in 2009, there have been 467 Bitcoin obituaries – all suggesting the bubble had finally burst. In 2022, with the bear market crashing crypto prices, Bitcoin has been declared dead 27 times. ECB’s Ulrich Bindseil and Jürgen Schaaf’s comments provided the latest instance of Bitcoin death.
The oldest death was in 2010 when it was argued that BTC couldn’t be a currency.