Bitcoin price is on its 'last stand' as per ECB Director who warns banks against promoting it
In a strongly worded blog post, the Director General of the European Central Bank Ulrich Bindseil warns about the dangers of investing in Bitcoin now that the cryptocurrency's price seems to have stabilized after the bankruptcy of crypto's second largest exchange FTX prompted a nosedive in value. He is of the opinion that this is a dead cat bounce and Bitcoin is "on the road to irrelevance," while "big Bitcoin investors have the strongest incentives to keep the euphoria going" while they are unwinding their trades.
As arguments, the ECB Director points out that crypto didn't lead to the promised revolution in finance, but was actually used as a speculative vehicle while "Bitcoin transactions are cumbersome, slow and expensive" with the added threat of exorbitant electricity consumption and e-waste generation to keep the blockchain going. The cryptocurrency's volatility is the main reason that Bitcoin has failed to establish itself as a viable payment tool, says Mr. Bindseil, and very rarely been used for transactions other than buying, selling, or staking crypto, so once its speculative potential is gone, its heydays have likely passed.
The post seems tailored to financial institutions and regulators who are still planning to peddle crypto, warning them that they will incur reputational damage in doing so, while lobbied-for regulations could actually legitimize it as just another asset class.
The current regulation of cryptocurrencies is partly shaped by misconceptions. The belief that space must be given to innovation at all costs stubbornly persists. Since Bitcoin is based on a new technology - DLT / Blockchain - it would have a high transformation potential. Firstly, these technologies have so far created limited value for society - no matter how great the expectations for the future. Secondly, the use of a promising technology is not a sufficient condition for an added value of a product based on it.
The ECB Director General memo is titled "Bitcoin’s last stand" as he refers to the recent price stabilization around the US$17,000 mark which some are interpreting as consolidation before new heights. "Bitcoin's conceptual design and technological shortcomings make it questionable as a means of payment," he piles on, and warns that the Bitcoin price is more likely to crash to new lows, rather than ride on the speculative wings of lax monetary policy once again.