European Central Bank: Bitcoin ETF like the Emperor’s New Clothes, BTC fair value still zero
The European Central Bank (ECB) has published an article titled “ETF approval for bitcoin – the naked emperor’s new clothes,” criticizing the recent rebound of bitcoin as a short-lived prosperity illusion. The article sarcastically points out that while bitcoin aims to challenge the demonized traditional financial system, it ultimately relies on traditional intermediaries to reach a wider group of investors.
In the article, Ulrich Bindseil, the Director-General of Market Infrastructure and Payments at the ECB, and Jürgen Schaaf, an advisor, argue that even with the introduction of bitcoin ETFs, bitcoin has not fulfilled its promise of becoming a “globally decentralized digital currency.” They also highlight the difficulties in conducting legal transfers and state that ETFs have not changed the fact that bitcoin is unsuitable as a “means of payment” or an “investment.”
The ECB emphasizes that the rise in bitcoin brought about by ETFs does not prove that bitcoin’s victory is unstoppable. They reaffirm that bitcoin’s “fair value is still zero” and that its prosperity cycle presents a terrible outlook, accompanied by significant damages, including environmental destruction and wealth redistribution at the expense of novice traders.
The ECB states that the risks associated with bitcoin mentioned in their 2022 article “Bitcoin’s last stand” have now become a reality. These risks include illegal payments remaining the primary application, bitcoin still being unsuitable for investment due to lack of cash flow, dividends, and social value, and the significant environmental impact of bitcoin’s proof-of-work consensus mechanism being comparable to that of a nation.
The ECB attributes the factors contributing to the increase in bitcoin to the halving of mining rewards, the approval of spot bitcoin ETFs by the U.S. Securities and Exchange Commission (SEC), and the expectation of interest rate cuts by the U.S. Federal Reserve. However, they sarcastically point out that despite bitcoin’s aim to challenge the demonized traditional financial system, it ultimately relies on traditional intermediaries to reach a wider group of investors.
The article concludes by stating that the price level of bitcoin is not sustainable, lacks fundamental economic data to assess fair value, and is difficult to prove its price rationality in speculative bubbles. The ECB urges governments to remain vigilant and protect society from money laundering, cybercrime, and other related crimes, as bitcoin can cause economic losses for individuals with low financial literacy and significant environmental destruction. They state that this work is not yet complete.
In the context of the entire article, the phrase “this work” seems to refer to the banning of bitcoin by various countries due to its extensive use in criminal activities.
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