Just over a year ago, on November 10, 2021, the value of one bitcoin reached an all-time high of about $68,000. It had started 2021 in the $30,000 range, so this was after 10 months of strong growth.
Following that November all time high, Bitcoin struggled for the rest of 2021 and began 2022 with a value of little more than $40,000.
When markets in general and cryptocurrency in particular crashed. Investors were alarmed by rising inflation and interest rates.
On July 1, the value of a bitcoin fell below $20,000, roughly half its value at the start of the year.
Throughout the late summer and early fall, Bitcoin traded about $20,000 per coin. Then, on November 8, when major cryptocurrency exchange FTX collapsed, bitcoin’s value plummeted to slightly around $16,000, where it stayed on December 1.
The European Central Bank (ECB) has issued a strong rejection of Bitcoin (BTC), describing the digital asset as unsuitable both as a payment method and as an investment vehicle in the aftermath of FTX’s collapse.
The recent stabilization of Bitcoin’s value around $20,000 — down from its peak of approximately $69,000 in 2021 — was a “artificially induced last gasp before the road to irrelevance,” wrote Ulrich Bindseil and Jürgen Schaaf in a blog post titled ‘Bitcoin’s last stand’ on Wednesday, November 30, refuting claims that the Bitcoin would recover from its recent decline.
According to the two central bankers, Bitcoin’s “conceptual design and technological shortcomings” made transactions “cumbersome, slow, and expensive,” making the flagship digital currency a “questionable” means of payment. They suggested that politicians should not award cryptocurrency formal status in the name of development and innovation.
“It does not create cash flow (as real estate does) or dividends (as equities do), it cannot be used productively (as commodities do), and it does not provide social benefits” (like gold). As a result, Bitcoin’s market valuation is entirely speculative.”
Furthermore, the blog criticized regulators, arguing that existing crypto frameworks were built by fallacies such as the premise that innovation must be supported at any costs. According to the post, “the belief that space must be given to innovation at all costs stubbornly persists.”
“Because Bitcoin appears to be neither a payment system nor a type of investment, it should be recognized as neither in regulatory terms and so should not be legitimized,” they said.
The article comes after Mark Branson, the President of the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin), told the ECB earlier this month that crypto businesses are full of “freeloaders and crooks.”
Meanwhile, the European Securities and Markets Authority (ESMA) cautioned in October that increased crypto use could have an impact on traditional finance. The ESMA said that crypto poses numerous financial stability risks due to its volatility and lack of regulation.
Lastly, Christine Lagarde, President of the European Central Bank, has expressed concern that the growth of cryptocurrency may represent a risk to the conventional banking system.