In a post titled “Bitcoin’s last stand,” the ECB’s director general discusses the cryptocurrency’s recent consolidation in price around the US$17,000 threshold, which some see as a strengthening before new peaks. Bitcoin, the most widely used cryptocurrency in the world, may have experienced a “dead cat bounce” in its recent price stability, according to the European Central Bank’s director general. Moreover, he cautions financial institutions that they risk harming their image if they actively encourage Bitcoin investment at this time.
Bitcoin heading to irrelevance
Director General of the European Central Bank Ulrich Bindseil published a strongly worded blog post warning against the risks of investing in Bitcoin now that the price seems to have settled down following the financial collapse of crypto’s second biggest exchange FTX. He thinks this is a dead cat bounce and that Bitcoin is headed for oblivion. Meanwhile, large Bitcoin investors have the most to gain from maintaining the current state of enthusiasm as they work to unwind their positions.
The ECB director argues that cryptocurrencies failed to bring about the predicted financial revolution and were instead used as a speculative vehicle and that Bitcoin transactions are inconvenient and costly, with the added risk of excessive electricity usage and e-waste production to keep the blockchain operational. According to Mr. Bindseil, Bitcoin’s lack of stability is the primary reason it has not become a mainstream payment method, and the cryptocurrency has been used for very few transactions outside of those related to crypto, suggesting that its heydays are likely over once its speculative potential is exhausted.
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 financial 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).
This post seems directed at banks and regulators who are still considering selling cryptocurrency; it warns them that doing so will damage their reputation, while regulations that have been pushed for could actually normalize cryptocurrency as merely another asset class.
