Since January 2023, bitcoin (BTC) has experienced several breakthroughs which have seen its valuation explode. The asset has repeatedly reached the $30,000 mark. A resistance level that it vigorously broke to reach the $40,000 mark, double its price at the start of the year. The asset is trading today around $43,655 after gaining 4.52% in the last 24 hours. Bitcoin (BTC) is therefore showing a dynamism that we have not seen for several months. However, in this context, some financiers believe that all this hype around the flagship crypto is biased. Let’s see in the following lines what it is about.
Bitcoin (BTC), a popular crypto unsuitable for the public?
Back in the top 10 of the most important assets in the global financial ecosystem, bitcoin (BTC) is on the rise. The situation is such that some analysts no longer see the flagship crypto coming down from this pedestal. And we can accept this perspective, in favor of which several arguments speak.
However, some experts do not see it in the same way. This is the case of Ulrich Bindseil and Jürgen Schaaf, two European central bankers. In a recent blog post published on the website of the European Central Bank (ECB), the two specialists criticized BTC at length.
The asset would be at the end of its life. A reason which, according to them, is due to its structural weaknesses. The position defended by bankers is that from an operational point of view, BTC reveals signs that make it unsuitable for real meaningful use. BTC is, they explain, too heavy, too slow and too expensive in gas costs, for general public use.
Intrinsic problems that prevent it from effectively fulfilling its role as a decentralized digital monetary alternative opposed to traditional monetary systems. What bankers are basically saying is that beyond its appeal, bitcoin has failed to establish itself as a means of carrying out legal transactions. But these are not their only grievances against the flagship crypto.
Bitcoin, an investment lacking in reliability?
We said previously that basically, bitcoin (BTC) was intended to offer an alternative to the traditional financial and monetary system. It seems, according to the arguments of Ulrich Bindseil and Jürgen Schaaf, that the flagship crypto has, somewhat, moved away from this initial objective.
Indeed, during the 2010s, BTC, which was initially a rather viable investment, appeared as a speculative asset. That is to say, it was essentially speculative fervor that determined the valuation of bitcoin on the crypto market. This was understandable because BTC was, compared to other asset classes, devoid of financial flows, dividends, productivity potential or intrinsic social benefits.
Except that the problem with speculation is that it requires capital inflows for it to prosper. This helps explain the periods of substantial price increases experienced by bitcoin (BTC) since it existed. Assets experiencing periodic increases linked to waves of new investors. Could the current surge in bitcoin be linked to this state of affairs?
Bitcoin, a manipulated market?
This is probably the main point of criticism from experts on the bitcoin (BTC) market. According to them, the latter would be manipulated. They particularly mention the role that exchanges and issuers of stablecoins may have played for this purpose during the first increases achieved by the asset. Ulrich Bindseil and Jürgen Schaaf also support something else. The fact that major bitcoin investors exert significant influence in perpetuating enthusiasm around the flagship crypto. According to them, several companies actively promoted bitcoin at their own expense in late 2020.
Meanwhile, a number of venture capital firms have maintained substantial investments dedicated to the flagship crypto. This, while the bear market was in full swing. As of July, venture capital investments in the crypto and blockchain ecosystem totaled $17.9 billion. A sign of persistent interest despite market fluctuations.
The other thing that persists in this ecosystem and further reinforces the skepticism around the rise of bitcoin (BTC) is the question of innovation. In particular, the conviction that the latter must be the determinant of crypto regulation. This belief is particularly evident when it comes to assets like bitcoin, which leverages distributed ledger technology and blockchain. For the two ECB experts, we must question the unshakeable faith in unbridled innovation. Because, despite the transformational potential attributed to these technologies, their real societal value remains limited, which casts doubt on their future benefits.
Faced with the perceived shortcomings of bitcoin as a payment and investment system, experts believe that legitimizing bitcoin (BTC) through regulation seems tricky. Indeed, investments in BTC certainly generate profits in the short term. But their long-term consequences such as tensions with users and damage to the reputation of the crypto sector cannot be ignored, as they are potentially considerable. Therefore, rather than hasty approval, caution is advised. A posture deemed necessary to protect against potential pitfalls linked to the uncertainty surrounding the trajectory of bitcoin.
Critics from European bankers Ulrich Bindseil and Jürgen Schaaf highlight fundamental concerns surrounding the rise of bitcoin (BTC). They call into question its adaptability as a means of general public transaction due to its intrinsic weaknesses. Additionally, BTC’s transformation into a speculative asset raises concerns about its reliability as an investment. Concerns, reinforced by allegations of market manipulation and influence of large investors. Overall, the financial community is called upon to take a cautious approach to the uncertainties surrounding bitcoin’s future trajectory. Regardless, the asset has once again reached a new level, reaching a valuation of $44,080.
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