Calm down, people! This is an opinion article published on the blog of the European Central Bank. The opinions expressed there are not (necessarily) the official position of the institution. The authors of the piece are writing in their personal capacity. Of course, both do have an employment relationship with the bank. In fact, one of them is the director of an entity and the other is an adviser. So, while it is true that this is an opinion, we are talking about an expert opinion. Therefore, it could be useful to reflect on what has been written. I recommend reading it (link here) before starting to read the following lines.
The first. The news has gone viral. And the headline “ECB Speaks” might confuse people. Many might come to believe that it is an official statement (and it is not). I used the phrase “ECB speaks” because that is how the news has been reported by the mainstream media. It’s not the end of the world. What causes the most noise is the prophecy of the authors regarding the supposed “irrelevance” of Bitcoin after the collapse of FTX. I will comment on this at the end.
Reminder: Opinion is not attack. In other words, the personal opinion of an individual, just because it is different from ours, is not (necessarily) the product of an evil conspiracy. As an opinion writer, I know that my opinions are my own and not those of the medium that gives me space. My role as a columnist is to present a sincere, honest and fair opinion based on my truth. Obviously it’sI write from subjectivity. It’s a point of view and nothing more. Does it make sense to be offended by an opinion?
We read the opinion of the other not to accept or reject what has been said. If the writer’s opinion is aligned with ours, we approve the opinion. We love the article. And we applaud the author. On the contrary, if the author’s opinion does not align with our preconceptions, we are offended and accuse him of being part of a great conspiracy. This attitude is obviously absurd. What happens is that, in this world of social networks, there are too many petty tyrants with totalitarian aspirations.
Now, all opinions are valuable. And in the diversity of opinions is that progress arises. We learn by similarity or contrast. The opinion of the other helps us to doubt, refine and reformulate our own opinions.
“Refusing to listen to an opinion, because one is sure that it is false, is equivalent to affirming that the truth one possesses is the absolute truth. Any refusal to discuss implies a presumption of infallibility.” Well said by the great John Stuart Mill.
Now we go by steps. Let’s start with the first statement of the article: “Bitcoin is rarely used for legal transactions”
It is true that “Bitcoin was created to supplant the existing monetary and financial system.” And yes “in 2008, the pseudonymous Satoshi Nakamoto published the concept”. And yes “since then, Bitcoin has been marketed as a global decentralized digital currency”.
You could say that Bitcoin, the citizen “currency”, has not been as successful as Bitcoin, the investment “digital asset”. Of course, the attractiveness of Bitcoin as an alternative currency is much less than its attractiveness as an investment instrument. The monetary revolution has not been such. In practice, what we have is a speculative asset. It is a code with a variable rate. Sort of a volatile price collectible. How do we know? This statement is provable. The volume on exchanges is much higher than the volume on retail. Or not? Bitcoin has indeed become an emerging market. Bitcoin has indeed become a Wall Street on steroids. But it has not become a substitute for the monetary and financial system.
In relation to Bitcoin as a form of payment, there are many convenience users. For example, Bitcoin p2p markets are particularly active in jurisdictions with many currency restrictions. In this case, Bitcoin works as a source of liquidity for the parallel currency markets. That, in large part, explains the popularity of these markets in countries like Argentina, Venezuela, Russia, China and Iran.
But the matter does not stop there. The gig economy, the gray economy, remittances, and other sectors find a lot of use in technology. This is true. However, Bitcoin has found a lot of competition from stablecoins. For many operations, stablecoins are more efficient than Bitcoin. In fact, Bitcoin has lost a lot of space in these spheres. And the trend promises to increase in the future. Why use BTC if you can use BUSD, USDT or USDC?
And within the European Union? Certainly, many of these uses mentioned here are not so relevant in the case of Europe. It is a common market with a common currency. And people have many ways to pay already. Then, that supposed “irreverence” could apply a little more to Europe than the other regions.
“Regulation can be misinterpreted as approval”
Of course, the regulation will be interpreted as approval. Because, in a certain way, it is a legitimation. In fact, the defenders of the regulation support this point (my case). Because that approval will surely increase the efficiency, reputation and credibility of the ecosystem. That means more demand. But of course it is not an easy task to adequately regulate such a market. “Wrong ideas”? Many. This market is full of them. Butwell, that a regulation with adequate ideas be promoted.
We continue… “Bitcoin is also not suitable as an investment. It does not generate cash flow (like real estate) or dividends (like stocks), cannot be used productively (like commodities), or provide social benefits (like gold). Therefore, the market valuation of Bitcoin is based solely on speculation.”
True (in part). Because if gold provides social benefits, so does Bitcoin. After all, there are a lot of people working in this industry (myself included). It is true about not having a cash flow, about not contributing dividends, and about the fact that it cannot be used as a raw material. But heor not provide social benefit is debatable. The blockchain industry employs a lot of people.
Now, Bitcoin is a speculative asset. That can be accepted. “Speculation”. What’s the problem with that? Speculative markets have been around forever. The art market, for example, is highly speculative. What cash flow does a Picasso bring you? And the dividends? None. Raw material? Either.
The desire to make money is not going to die down after the FTX collapse. Something does not lose its relevance because it is speculative. Human greed is human greed. We will always find someone willing to put down a dollar to earn two. AHere the authors are being too categorical with this supposed “irrelevance” of Bitcoin. This has to be seen to be believed. Personally, I have my doubts.. Surely it will take us a while to recover from this blow, but I see it as a somewhat improbable exaggeration to speak of total irrelevance.
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