ECB Critiques Bitcoin: Expensive, Slow, and Inconvenient for Transactions

ECB Critiques Bitcoin: Expensive, Slow, and Inconvenient for Transactions
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The European Central Bank (ECB) has once again spotlighted Bitcoin in its latest publication, underscoring the cryptocurrency's inefficiencies as a payment solution. The report highlights that the only fuel for the speculative bubble in the market is the influx of new capital, casting a critical eye on Bitcoin's role and impact.

Bitcoin has struggled to fulfill its promise of becoming a global, decentralized digital currency. Instead, it has become ensnared in manipulations and frauds. The ECB's analysis comes in the wake of the U.S. Securities and Exchange Commission's (SEC) approval of spot Bitcoin Exchange-Traded Funds (ETFs) on January 10, 2024. Despite this regulatory nod, which saw over $5 billion in net capital inflow into the sector, according to SoSo Value, the ECB argues that Bitcoin remains a poor choice for transactions, citing its high costs, slow processing times, and general inconvenience.

The ECB's experts express skepticism towards the claims that the SEC's decision signifies the safety of Bitcoin investments and the preceding growth as evidence of triumph. They disagree with both assertions, pointing out the realization of all risks mentioned in their November 2022 report. Since that last publication, Bitcoin's price has surged almost 200% from $16,500 to $51,780, as per TradingView data.

Key criticisms from the ECB include Bitcoin's negligible use for payments outside the darknet due to its costly and slow transactions. Moreover, the asset is deemed unsuitable for investments, lacking financial flows, dividends, or productive use, and offering no social benefits. The report also touches on the environmental impact of Bitcoin mining, despite a reported increase in the use of "green" energy within the sector.

The 2023 market rally is attributed to inflated expectations of a Federal Reserve rate cut, which did not occur, and the approval of spot Bitcoin ETFs, seen as the only effective "fuel" in the speculative bubble. The ECB questions the sustainability of such ETFs, challenging the rationale behind paying a beneficiary commission over direct Bitcoin purchases or custodial services.

The report outlines three main reasons for Bitcoin's perceived instability: regulatory gaps, increased demand among criminals, and market manipulation in an unsupervised market. The ECB stresses that Bitcoin's current price level does not reflect its stability, lacking fundamental economic data or fair value for effective forecasting.

In conclusion, the ECB views the current market growth not as a reflection of Bitcoin's structural advantages but rather the effectiveness of the cryptocurrency lobby. This critical perspective sheds light on the broader challenges facing Bitcoin and the cryptocurrency market, emphasizing the need for caution and regulation to navigate its speculative and operational risks.