ECB Reaffirms Bitcoin’s ‘Zero Value’ Stance

The fair value of Bitcoin remains zero, despite the approval of spot Bitcoin ETFs in the US and the preceding price rally, according to experts at the ECB.

In November 2022, Ulrich Bindseil, Director General for Market Infrastructure and Payments, and Jürgen Schaaf, an advisor to the institution, published an article titled “Bitcoin’s Last Stand.” In it, the experts described the stabilization of the cryptocurrency’s prices as “an artificially induced last gasp before the road to irrelevance.”

The price of digital gold has since risen from ~$17,000 to ~$51,000. However, this has not swayed Bindseil and Schaaf from their view of the asset’s “inevitable collapse.”

In an essay titled “ETF Approval — The Emperor’s New Clothes,” they asserted that they were correct in their main arguments from over a year ago:

• Bitcoin has failed as a global decentralized digital currency for payments;
• The cryptocurrency has not become a suitable investment asset, with its value inevitably set to decline.

“Today, BTC transactions remain inconvenient, slow, and costly. Outside the darknet, Bitcoin is hardly used for payments at all. Regulatory initiatives to combat the widespread use of cryptocurrency by criminals have so far been unsuccessful,” the experts believe.

They noted that even the full support of the Salvadoran government, including the distribution of free $30 in Bitcoin, failed to create a successful case over two years. In autumn 2021, the country’s authorities legalized the first cryptocurrency as a means of payment.

“Similarly, Bitcoin remains unsuitable as an investment. It generates no cash flows (like real estate) or dividends (stocks), cannot be productively used (commodities), offers no social benefits (gold jewelry), or subjective value based on outstanding abilities (artwork),” wrote the ECB specialists.

Bindseil and Schaaf believe that the autumn Bitcoin rally is largely linked to expectations of ETF launches in the US, a softening of Fed policy, and the halving in April 2024.

In their view, these sentiments allowed cryptocurrency lobbyists to “reinflate the bubble,” with the influx of funds impacting prices. But in the long term, prices will eventually return to their fundamental values. Without any cash flow or other income, the fair value of the asset is zero, Bindseil and Schaaf emphasized.

According to them, Bitcoin exchange-traded funds have merely become a convenient tool for speculating on the asset, as there have long been less costly ways to invest in cryptocurrency. Without the need to pay management fees, digital gold can be purchased on centralized exchanges, through a custodian, or stored independently, the experts noted.

They stated that such products only simplify market manipulation of Bitcoin.

Regarding halving expectations, Bindseil and Schaaf pointed out that this is a programmed event occurring every four years. Historically, price increases have followed the halving of block rewards. Therefore, the experts are confident that the reduction in the daily influx of new coins from 900 BTC to 450 BTC is already factored into the cryptocurrency’s market valuation.

“The price level of Bitcoin is not a metric of its sustainability. There are no fundamental economic data, no fair value on which to base serious forecasts. In a speculative bubble, there is no ‘proof of price.’ Instead, it reflects the effectiveness of the crypto lobby,” concluded Bindseil and Schaaf.

As reported, amid the flow of funds from gold to Bitcoin exchange products, ETC Group suggested that in the long term, the cryptocurrency will surpass the precious metal as the primary store of value.