The European Central Bank has issued a strong warning against the dangers of cryptocurrencies
Brussels: The European Central Bank has issued a strong warning against the dangers of cryptocurrency. In light of the collapse of FTX and recent issues in the crypto market, the ECB blog published its stance against Bitcoin. The position of the ECB was clarified in the blog dated November 30, 2022.
According to the ECB, the Bitcoin system is causing unprecedented pollution. “Bitcoin consumes a massive amount of energy in all economies. The European Central Bank compares bitcoin to Austria. Every year, enormous amounts of electricity are consumed. Hardware, on the other hand, creates mountains of waste. It is characterised by inefficiency.
Not an ideal investment.
The ECB reminds us that Bitcoin is never an ideal investment. It is not a cash-flowing sector like real estate. It does not pay dividends like stocks, is not productively usable like commodities, and is not giftable like gold. The market value of Bitcoin is based on speculation. The blog says that this depends on the new money.
In addition to environmental concerns, the ECB warns of regulatory concerns regarding cryptocurrency. Because Bitcoin is not suitable as a payment system or as a form of investment, it does not need to be regulated or legalised. The ECB warned the financial industry about the long-term consequences of promoting bitcoin investments.
A fluctuating market.
Bitcoin was worth $69,000 in November 2021. In June 2022, it drops to $17,000. The value has remained around $20,000 since then. The recent FTX scandal has pushed Bitcoin below $16,000.
By the end of 2020, businesses had begun heavily promoting Bitcoin. Some venture capital (VC) firms are investing heavily in crypto.
The collapse of FTX.
Concerns about this have been fueled by the recent collapse of FTX, a $32 billion cryptocurrency exchange. The exchange was established in 2019. It peaked in July 2021. It was the third-largest cryptocurrency exchange, with over a million users, but it has now collapsed.
Bitcoin was created in 2008 to address flaws in the existing monetary and financial system. The idea was to create a decentralised digital currency to democratise global transactions. Unnecessary fees and central bank manipulation were not included.
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