On February 22, the European Central Bank (ECB) described Bitcoin as a ‘dead cat’ and criticized its use in criminal activities on the darknet. These remarks have ignited a backlash from the crypto community, questioning the ECB’s stance and credibility.
Bitcoin Failed In Its Original Promise
In Ulrich Bindseil’s and Jürgen Schaaf’s blog post, the European Apex bank criticized Bitcoin for failing to fulfill its original promise as a global decentralized digital currency. The ECB argued that Bitcoin has not gained mainstream adoption and enjoys limited legitimate use cases.
Bitcoin has failed to become a global decentralised digital currency, instead falling victim to fraud and manipulation.
The recent approval of an ETF doesn’t change the fact that Bitcoin is costly, slow and inconvenient, argues #TheECBBloghttps://t.co/e9Ek01Dism pic.twitter.com/ddBFsv4g0w
— European Central Bank (@ecb) February 22, 2024
The European institution also touched on Bitcoin mining. It noted that transaction validation on the network contributes to environmental damage due to its reliance on the proof-of-work (PoW) consensus mechanism.
The ECB stated that the energy demands of the PoW network are on the same scale as some small countries. Higher Bitcoin prices imply higher power consumption as miners scramble to solve the inherent cryptographic puzzles.
Furthermore, the financial agency noted that Bitcoin is not a suitable investment vehicle as it does not offer ready cash flow for easy liquidity access. It implied that the Bitcoin price is largely driven by fear of missing out (FOMO) initiated by less knowledgeable retail investors who often jump on the crypto bandwagon.
The ECB added that these compelling reasons made it question the validity of the US Securities and Exchange Commission’s (SEC) decision to approve a spot Bitcoin exchange-traded fund (ETF). To them, an ETF approval does not take away the fact that the fair value of Bitcoin is still zero.
X’s Community Note Debunk the ECB’s Claims
The ECB’s post on X (formerly Twitter) ignited a backlash. One notable response was X’s Community Note feature, which debunked several of the European agency’s claims regarding the crypto bellwether.
The “X Community Note” feature is a tool or function within the X platform that allows users to add comments or annotations to posts, providing additional context or information.
In a direct response to the ECB’s post, the Community Note stated that 0.34% of total crypto transactions were attributable to criminal activities. Bitcoin’s involvement in this was less than 25% compared to 110 billion euros used in criminal enterprises in 2010.
Source: X
It also doubled down on the wider crypto market’s belief that the Bitcoin network is an open monetary protocol and a viable store of value. It cited reports showing that the Euro currency was losing its purchasing power and that Bitcoin is a catalyst for pivoting the world to renewable energy sources.
In addition to the Community Note, the crypto community did not react positively to the ECB’s claims. One such example is crypto evangelist and Messari co-founder and CEO Ryan Selkis, who quoted the ECB’s post with the caption:
“The Euro will be dead in 4-5 years. Bitcoin will be alive and well as long as nodes exist that run the Bitcoin core client.”
The Euro will be dead in 4-5 years.
Bitcoin will be alive and well as long as nodes exist that run the bitcoin core client. https://t.co/7nxCVsAMY0
— Ryan Selkis (d/acc) (@twobitidiot) February 22, 2024
Another user noted that the Euro has lost 99.5% of its value relative to Bitcoin in the last ten years.
The Euro has lost 99.5% of its value vs. #Bitcoin in less than 10 years.
Meanwhile, 97% of all trading days are in profit for Bitcoin.
Meaning anyone who has euro-cost-averaged into Bitcoin instead of holding onto the ECBs flaming garbage is massively in profit right now.… pic.twitter.com/G74UT8bcPR
— Stack Hodler (@stackhodler) February 22, 2024
According to the user, 97% of all trading days are in profit for Bitcoin. This means investors who have held the crypto asset in the last decade have made stronger returns than using a Euro-backed investment vehicle.
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