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European Central Bank bloggers think bitcoin is dead
Imagine the scene: There’s a teenager on the way to soccer practice absolutely in shambles because he just learned that Goldman Sachs brokered a cross-currency swap for Greece so that the latter could gain admission into the eurozone. The teenager then systematically loses his mind after each austerity package is announced in the following months and years.
That teenager was me.
Next, imagine that now-adult person, who writes about bitcoin for a living, reading a ECB blog post with the title: “Bitcoin’s last stand.”
The kid can’t catch a break. But no need to imagine because this actually happened last Wednesday. It’s critical to level-set that the published article doesn’t represent an official position of the ECB. It’s just a blog post on the ECB’s official website. But because it’s on the ECB’s official website it is flying under a banner of authority. As such, it is worth parsing through the main points brought up in the post.
The post starts with an unsubstantiated (which was never substantiated later) point that bitcoin’s current price action is “an artificially induced last gasp before the road to irrelevance.” But what can be asserted without evidence can also be dismissed without evidence. So, let’s dismiss this point.
The next section in the ECB post is titled: “Bitcoin is rarely used for legal transactions.” Unfortunately, the body of the section doesn’t prove this point specifically (a shame, really, because it isn’t true) and instead focuses on how bitcoin’s value is based solely on speculation because a) it has no cash flow (like real estate), dividends (like equities), productivity (like commodities) or social benefits (like gold) and b) VCs are propping it up with $17.9 billion of investment in blockchain and crypto.
On the former point about regulation, I agree. Regulation could be misunderstood as approval, and regulation has prompted “the conventional financial industry to make it easier for customers to access bitcoin.” And yes, maybe this ease has suggested to small investors that bitcoin is a sound investment even if some other investors don’t think so. But that’s exactly how markets work: Some people think something is worth buying and some people think something is worth selling. Just because you think something is worth selling doesn’t mean that it isn’t worth buying.
As for the authors noting that the “Bitcoin system is an unprecedented polluter,” I will point you to some of the many articles and reports about this in particular (here, here, here and here). But just for the sake of a semantic argument (which are bad arguments), the energy sector is really the only “unprecedented polluter” given it’s the biggest.
On the latter, banks have enough reputational risk on their own. Two examples:
Wells Fargo was fined $3 billion in 2020 for fraudulent sales practices including opening accounts for people without their knowledge (by the way, Wells Fargo still exists)
Sure, this doesn’t mean there might not be reputational risk for banks associated with promoting bitcoin, but surely there’s a reputational merit outweighing this risk if bitcoin works out and customers make money.
In summary, I think this blog post is just that: a short blog post that isn’t meant to represent anything definitive. I look forward to a more thoughtful, wholesome report on bitcoin’s march to irrelevance by the ECB in the future.
Casa enables customers to create digital vaults to store bitcoin and bitcoin only. Think of it as a safe, but digital and specifically for bitcoin. Now, Casa is enabling customers to also store ether (the native token of Ethereum). The reason this move kicked up dust with some bitcoiners is because there is a shared ideal that Bitcoin-only businesses are The Way and anything else is a divergence from that ideal and should be punished. A firm, company or business moving from Bitcoin-only to not Bitcoin-only is perceived as a character flaw of the proprietors at best and an attack on Bitcoin at worst.
Listen, I’m probably the last CoinDesker who would talk to you about the viability of blockchains for anything except money without a centralized mint, and I’m also probably the last CoinDesker who would tell you what you should do and how you should do it. But I think the view that Casa’s move is somehow emblematic of the poor character of its founders or an attack on Bitcoin is patently absurd.
Casa made a business decision. Customers wanted ether vaults, so Casa sold them ether vaults. If you don’t want an ether vault, don’t use an ether vault. Casa still offers bitcoin vaults, so use that. Or don’t! Use a competitor product or create your own. Casa is not forcing customers to do anything.
As with all my takes, this one will no doubt make me immensely popular, but in the words of Casa Chief Technology Officer Jameson Lopp, what makes you think I care?
Join our panel of experts as they outline key takeaways to help your organization develop a strong anti-financial crime and crypto compliance program for a changing regulatory environment. Learn how a holistic surveillance approach across both fiat and cryptocurrency provides a more complete picture of financial crime risk that upholds market integrity principles of TradFi, while maintaining the unique freedoms of decentralized markets. Register today!
TAKEAWAY: On Monday, crypto lender BlockFi filed for bankruptcy protection, days after suspending withdrawals. Executives estimate the company has between $1 billion and $10 billion in both assets and liabilities. According to the company’s petition, BlockFi’s executives estimate the company has more than 100,000 creditors, including FTX US, the Securities and Exchange Commission (SEC) and Ankura Trust Company. The company indicated it hoped to restructure and continue operations in the meantime. Read more here.
TAKEAWAY: Messaging app Telegram has sold $50 million in usernames in less than a month through its blockchain-based auction platform, Fragment, CEO Pavel Durov said Wednesday. The figure speaks to the success of Telegram’s second go-around at bootstrapping its own crypto infrastructure. Bolstered by Fragment’s strong sales, Durov is setting Telegram on course for deeper crypto buildouts, which includes building a decentralized exchange and non-custodial wallets.Read more here.
TAKEAWAY: On Wednesday, crypto exchange Kraken said it was laying off 30% of its global staff – around 1,100 people – in response to the crypto market downturn. “Since the start of this year, macroeconomic and geopolitical factors have weighed on financial markets. This resulted in significantly lower trading volumes and fewer client sign-ups,” Kraken said in a blog post. The crypto market has sunk this year, with bitcoin (BTC) losing 63% of its value since the end of 2021.Read more here.
On this episode of “Money Reimagined,” hosts Michael Casey and Sheila Warren speak withJuan Zarate, senior adviser for Transnational Threats Project and Human Rights Initiative at CSIS, the Center for Strategic and International Studies; to discuss how crypto companies can better prepare themselves for financial risks and what is a “rogue state.”
Ah Sam, will we ever be able to escape you? This week, “main character syndrome” came roaring back into fashion as Sam Bankman-Fried broke his silence with a string of interviews culminating in appearances with Andrew Ross Sorkin at the New York Times DealBook Summit and on “Good Morning America” with George Stephanopoulos. NLW breaks down what SBF said, and how the community is reacting.
Ted Cruz is a serving US Senator for Texas. In this interview, we discuss the importance of Bitcoin for Texas and the United States, communicating the threat of CBDCs, the political and regulatory challenges, and Bitcoin’s symbiotic relationship with energy.
