Bitcoin was already on a dead end before the collapse of Sam Bankman-Fried’s FTX crypto exchange, ECB analysts write in a blog post.
The technological imperfections of Bitcoin would make it a questionable means of payment.
The most recent price increase is probably an “artificial last gasp before the path to insignificance”, analysts interpret the current development.
The Bitcoin cryptocurrency is heading towards a dead end, which was already apparent before the collapse of crypto exchange FTX by Sam Bankman-Fried, according to a contribution from analysts at the European Central Bank (ECB).
In a blog post on Wednesday titled “Bitcoin’s Last Stand”, they noted that Bitcoin’s price has recently been fluctuating around $25,000 after falling to $18,000 from a yearly high of just under $20,000. $80,000 earlier this year.
“For Bitcoin proponents, the apparent stabilization signals a pause on the path to new highs,” wrote Ulrich Bindseil and Jürgen Schaff, who both work in the ECB’s Market Infrastructure and Payments Department. “However, it’s more likely to be one last artificially induced jump on the road to oblivion – and it was predictable even before FTX went bankrupt, which sent the price of Bitcoin well into the fray. below $16,000.”
Bitcoin is not suitable as an investment
They added that using bitcoin for transactions is tedious, and while the underlying technology has great growth potential, the cryptocurrency is not used in any meaningful way for legitimate purposes in the real world. . This is the balance sheet of the two analysts.
Additionally, Bitcoin is not suitable as an investment because cryptocurrency does not generate cash flow or dividends, cannot be used productively like commodities, and has no social benefits like gold. .
Instead, Bitcoin’s value is based on pure speculation, largely based on hype from mainstream investors and lobbyists, they continued.
“Large bitcoin investors have the greatest incentive to sustain the euphoria,” the authors said. “At the end of 2020, individual companies started mining Bitcoin at company expense. Some venture capital (VC) companies also continue to invest heavily. Despite the ongoing “crypto winter,” venture capital investments in the crypto and blockchain industry totaled $17.9 billion as of mid-July.
Officials also wrote that the world’s largest cryptocurrency poses a reputational risk to banks. Despite the potential for short-term gains, promoting the token still poses long-term dangers.
ECB staff have warned that the regulation could be misinterpreted as consent, even as calls for oversight of the crypto industry grow louder.
“Bitcoin does not appear to be suitable either as a payment system or as a form of investment, it should not be treated as such from a regulatory point of view and therefore should not be legitimized”, conclude the ECB authors.
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