One Bitcoin transaction consumes hardware comparable to the hardware of two smartphones. Second, it produces mountains of hardware waste. Bitcoin mining is estimated to consume electricity per year comparable to Austria. First, it consumes energy on the scale of entire economies. It’s also worth noting that the Bitcoin system is an unprecedented polluter. The entry of financial institutions suggests to small investors that investments in Bitcoin are sound. This concerns asset managers and payment service providers as well as insurers and banks. The supposed sanction of regulation has also tempted the conventional financial industry to make it easier for customers to access bitcoin. Secondly, the use of a promising technology is not a sufficient condition for an added value of a product based on it. Firstly, these technologies have so far created limited value for society - no matter how great the expectations for the future. Since Bitcoin is based on a new technology - DLT / Blockchain - it would have a high transformation potential. The belief that space must be given to innovation at all costs stubbornly persists. The current regulation of cryptocurrencies is partly shaped by misconceptions. While the EU has agreed on a comprehensive regulatory package with the Markets in Crypto-Assets Regulation (MICA), Congress and the federal authorities in the US have not yet been able to agree on coherent rules. Moreover, the different jurisdictions are not proceeding at the same pace and with the same ambition. However, legislation on crypto-assets has sometimes been slow to ratify in recent years - and implementation often lags behind. In July, the Financial Stability Board (FSB) called for crypto assets and markets to be subject to effective regulation and supervision commensurate with the risks they pose - along the doctrine of "same risk, same regulation". Yet the risks of crypto assets are undisputed among regulators. Indeed, lawmakers have sometimes facilitated the influx of funds by supporting the supposed merits of Bitcoin and offering regulation that gave the impression that crypto assets are just another asset class. Their names sometimes read like a who's who of US regulators.īut lobbying activities need a sounding board to have an impact. In the US alone, the number of crypto lobbyists has almost tripled from 115 in 2018 to 320 in 2021. Large investors also fund lobbyists who push their case with lawmakers and regulators. Regulation can be misunderstood as approval Despite the ongoing "crypto winter", VC investments in the crypto and blockchain industry totalled USD 17.9 billion as of mid-July. Some venture capital (VC) firms are also still investing heavily. At the end of 2020, isolated companies began to promote Bitcoin at corporate expense. during the first waves are well documented, but less so the stabilising factors after the supposed bursting of the bubble in spring.īig Bitcoin investors have the strongest incentives to keep the euphoria going.īig Bitcoin investors have the strongest incentives to keep the euphoria going. The manipulations by individual exchanges or stablecoin providers etc. Bitcoin has also repeatedly benefited from waves of new investors. Speculative bubbles rely on new money flowing in. The market valuation of Bitcoin is therefore based purely on speculation. 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). But Bitcoin is also not suitable as an investment. In the mid-2010s, the hope that Bitcoin's value would inevitably rise to ever new heights began to dominate the narrative. Bitcoin has never been used to any significant extent for legal real-world transactions. However, Bitcoin's conceptual design and technological shortcomings make it questionable as a means of payment: real Bitcoin transactions are cumbersome, slow and expensive. Since then, Bitcoin has been marketed as a global decentralised digital currency. In 2008, the pseudonymous Satoshi Nakamoto published the concept. Bitcoin is rarely used for legal transactionsīitcoin was created to overcome the existing monetary and financial system. More likely, however, it is an artificially induced last gasp before the road to irrelevance – and this was already foreseeable before FTX went bust and sent the bitcoin price to well below USD16,000. For bitcoin proponents, the seeming stabilization signals a breather on the way to new heights. Since then, the value has fluctuated around USD 20,000. The value of bitcoin peaked at USD 69,000 in November 2021 before falling to USD 17,000 by mid-June 2022. Amid the widespread fallout in crypto markets following the collapse of a major crypto exchange, The ECB Blog takes a look at where we stand with Bitcoin.
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