Bitcoin ‘on the road to irrelevance’, says ECB
The European Central Bank said Bitcoin is on the “road to irrelevance” today as it slammed the cryptocurrency as a “speculative bubble” with no productive value.
ECB officials Ulrich Bindseil and Jürgen Schaaf wrote in a blog this morning that Bitcoin was in an “artificially induced last gasp” which was inevitable even before the implosion of crypto exchange FTX earlier this month.
Cryptocurrency prices have tumbled this year and fallen sharply in the past weeks after the collapse of Sam Bankman-Fried’s exchange, which has rocked the sector and sparked a string of high profile bankruptcies.
Digital asset values have fallen throughout the year in a so-called ‘crypto winter’, with Bitcoin – the most valuable currency – trading down over 70 per cent from its November peak.
Bindseil and Schaaf attacked the currency today and said it was “not suitable as an investment”.
“It does not generate cash flow (like real estate) or dividends (like equities), cannot be used productively (like commodities) or provide social benefits (like gold),” they wrote.
“The market valuation of Bitcoin is therefore based purely on speculation.”
They added that it relied on “new money flowing in” and was subject to price manipulation from those in the space.
“Big Bitcoin investors have the strongest incentives to keep the euphoria going,” Bindseil and Schaaf said.
The comments come as regulators and central bankers struggle to get to grips with the sector as fears of contagion spread in the wake of FTX’s collapse.
Several firms have already been caught up in the fallout, with crypto lender BlockFi filing for chapter 11 bankruptcy earlier this week due to its exposure to Sam Bankman-Fried’s firm.
The chief of the Financial Conduct Authority Nikhil Rathi said this morning that the turmoil in the market had got the “regulatory debate moving much faster in jurisdictions around the world”.
The UK’s financial watchdogs are set to bring the sector into their remit after the Financial Services and Markets Bill makes its way through parliament and grants regulators fresh powers.