A harsh article on Bitcoin has appeared on the ECB blog these days. 2022 was undoubtedly a difficult year for the cryptocurrency world, culminating in November with the bankruptcy of the FTX exchange. The value of bitcoin went from peaking in the $69,000 area in November 2021 before falling to $17,000 in mid-June 2022. Since then, the value has fluctuated around $20,000.
“For bitcoin advocates, the apparent stabilization signals a pause on the road to new heights. More likely, however, it is an artificially induced last gasp before the road to irrelevance – and this was already to be expected before FTX went bust and sent the bitcoin price well below USD 16,000.” reads on the ECB blog in an article by Ulrich Bindseil and Jürgen Schaaf, the former is general manager of the Market Infrastructure and Payments division, the latter is an advisor of the same.
The article argues that Bitcoin is not suitable as an investment as it does not generate cash flows (such as real estate) or dividends (such as stocks), cannot be used productively (such as commodities) or provide social benefits (like them). “The market valuation of Bitcoin is therefore based exclusively on speculation,” explain the two experts who also criticize the energy consumption linked to bitcoins. A frontal attack on the most widespread crypto though it is not an official paper or an indication of policy.
Merone (Bitpanda): knowledge of bitcoin and its underlying technology need to be improved
An attack that did not go unnoticed. Orlando Merone, Country Manager Italy of Bitpanda, points out how these ECB comments on Bitcoin show how much room for improvement there is in terms of knowledge of the most important cryptocurrency in the world, and the technology behind it. For example, regarding the criticisms on the energy consumption, it is important to carefully consider what kind of energy Bitcoin actually uses. “Bitcoin’s underlying technology is incredible and miners always prefer the cheapest energy option, which is often – not always – also the cleanest. If we take a closer look at the technology, the Proof of Work (PoW) validation mechanism includes a very relevant security system. You can not only look at energy expenditure, but also how much this contributes to network security, and the answer is simple: a lot. So we should discuss how much energy we want to put into security. Not an easy question to answer,” asserts Merone.
On the speed/cost of transactionswithout wanting to examine the costs and times of an international bank transfer, Merone explains how in truth transfers in BTC – and in other cryptocurrencies – prove to be extremely competitive on many occasions, so much so that there are many crypto startups dedicated to international remittances that have met with great success, think for example of the Mexico. “Distribution Ledger Technology is undeniably revolutionary, even more so if we look at it from a different perspective than that of us Europeans: the freedom and independence of Bitcoin can represent an incredible added value for all those who live in authoritarian regimes or where there are strong capital controls.”
“Of course it is understandable that the Eurotower is skeptical about Bitcoin – continues the Country Manager Italy of Bitpanda – we are still in a initial stage of the development of this technology, moreover in a bear market and we understand that the latest events in the cryptosphere, certainly not due to Bitcoin and its underlying technology, can only fuel this skepticism. This is why we have always made regulatory compliance our guiding star, as demonstrated for example by the crypto license obtained by BaFin in Germany a few days ago. This path, made of regulation and safetycan only make Bitcoin and its revolutionary potential better known to everyone”.