On Thursday, the European Central Bank (ECB) published a blog repeating debunked claims about bitcoin . The world’s first and largest cryptocurrency, according to ECB Director General Ulrich Bindseil and advisor Jürgen Schaaf, has a fair value of “zero dollars.”
In other words: the central bank for the world’s largest trading block cannot recommend bitcoin as an investment because it’s going to crash.
“Bitcoin has failed on the promise to be a global decentralized digital currency and is still hardly used for legitimate transfers. The latest approval of an ETF doesn’t change the fact that bitcoin is not suitable as means of payment or as an investment,” Bindseil and Schaaf wrote, referencing the fleet of spot bitcoin exchange-traded funds that went live in the U.S. in January, which have so far largely exceeded analyst predictions.
If it seems off that the ECB would comment at all on bitcoin, it’s likely because the authors too feel the Crypto Vibe Shift , and see a potential rally on the horizon following the successful launch of ETFs and the lifting of crypto winter. Bitcoin has more than doubled in price to above $51K in the last six months, according to CoinDesk Indices.
“For society, a renewed boom-bust cycle of Bitcoin is a dire perspective. And the collateral damage will be massive, including the environmental damage and the ultimate redistribution of wealth at the expense of the less sophisticated,” they write.
Indeed, while “bitcoin’s price level is not an indicator of its sustainability,” it is impossible for the authors to acknowledge the recent gains. Bitcoin’s recent “speculative bubble” has a social dimension, in that interest in bitcoin is mostly a matter of FOMO and “the effectiveness of the Bitcoin lobby,” they write.
It is also tied to economic factors. “The rally in the autumn of 2023 was initiated by the prospect of an imminent turnaround in the U.S. Federal Reserve's interest rate policy, the halving of the BTC mining rewards in spring [2024] and later the approval of the bitcoin spot ETF by the SEC,” Bindseil and Schaaf write.
It’s an interesting move to reverse the clock to try to explain what “initiated” bitcoin’s rally considering all three of those factors — rate cuts, the halving and ETFs — are still in play.
Let’s put aside the fact that over the past decade the euro has lost 99.5% of its value versus bitcoin, according to TradingView data. The authors also say that bitcoin “is still not suitable as an investment” because it lacks cash flows, dividends, productive commercial uses or “social benefit” and they remain purposefully ignorant of the reasons why crypto has seen rapid adoption in countries beset by hyperinflation and remains attractive to people in the U.S. and E.U.
This isn’t even the first time the ECB has predicted bitcoin’s demise. In 2022, Bindseil and Schaaf wrote that a move from $17,000 to $20,000 in the weeks after the collapse of FTX was a “dead cat bounce” and “an artificially induced last gasp before the road to irrelevance.” While it’s true it took a long time for bitcoin to regain ground, bitcoin now looks set to retest its all-time high around $69K.
Not willing to contemplate at all why people are interested in cryptocurrencies (for instance, not once were the words inflation, savings or high fees brought up), Bindseil and Schaaf further argue that any rise could likely be explained by “price manipulation” and fraud. They cite a Forbes study from 2022 that found 51% of reported bitcoin exchange volumes were likely faked, in an effort to conflate price with volumes.
This point comes up again when they cite a study using bitcoinity data (a platform in beta, by the way) that suggests volumes fell 75% to an average 500K trades per day in 2023 from 2 million between 2019-21. How exactly volumes connect to price is never made clear, especially considering if you zoom out on the bitcoinity chart , you’ll see in 2016 three exchanges alone — BTCChina, Huobi and OkCoin — counted average daily trading volumes above 50 million.
The authors cannot help but see bitcoin as a criminal enterprise — even bringing up the fact that the U.S. Securities and Exchange Commission’s Twitter/X account was hacked to post fake news about bitcoin ETFs. This may just be me, but I think that reflects more poorly on the SEC than on the Bitcoin network.
But more to the point: The ECB lies about the criminal use of bitcoin, a long running claim that has been debunked time and again. At one point, without citing a source, the authors write “Despite the market downturn, the volume of illicit transactions has continued to rise.” All available evidence, including yearly crime reports from Chainalysis, suggest that crypto crime declines in periods of price decline.
See also: Crypto Money Laundering Dropped 30% Last Year: Chainalysis
Further, the claim that bitcoin “remains the top choice for money laundering in the digital world” is patently false. Perhaps it’s unfair to compare bitcoin to the world's reserve currency, the U.S. dollar, so perhaps we’ll just discuss how much suspected money laundering is committed with the euro. Why again was the 500 euro note banned?
Indeed, the authors directly contradict themselves, discussing the precise reason why bitcoin is falling out of favor for criminal use: because it is run on an immutable, fully public and transparent ledger. “Therefore, Bitcoin has been a cursed tool for anonymity, facilitating illicit activities and leading to legal action against offenders by the tracing of transactions,” they write.
Perhaps the only thing the authors got right is when they said the “decentralised nature of Bitcoin presents challenges for authorities, sometimes leading to unnecessary regulatory fatalism.” True, Bitcoin exists for a reason — whether they want to examine that or not — but it doesn’t mean that the use of this network cannot be appropriately regulated.
The ECB would be better off doing just that, rather than predict Bitcoin’s death for the thousandth time.
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– D.K.
@danielgkuhn
daniel@coindesk.com
