As we have witnessed in the past weeks, especially in recent days, Significant recovery in BitcoinLooks like this is over crypto winter In an environment where the entire cryptography industry has been mired since 2022, new news, not insignificant, contributes to the factors supporting the industry’s resurgence.
And that too European Central BankIn a working paper published on the blog, a significant change of opinion About the main cryptocurrency. The results of this new 2023 report are quite different from those expressed a year ago.
The two ECB studies offer different perspectives on Bitcoin, reflecting different approaches and conclusions. Like this, “Bitcoin’s last stop” The newly published report, published in late November 2022, focuses on Bitcoin’s challenges and limitations, highlighting Bitcoin’s volatility, limited use in legal transactions, and speculative nature. WP2868Conversely, it analyzes its role in emerging and developing economies where it can serve as a haven from instability of local currencies.
Likewise, last year’s question Bitcoin’s viability as a currency or investmentWhile he continues to acknowledge the speculative aspect of Bitcoin, noting its negative environmental impact and these 2023 risks for the financial industry, he also states: legitimate processing uses in certain contexts, particularly in countries with less developed financial systems.
Therefore, significant change between documents Perspective on the use and value of Bitcoin. The former highlights its downsides and speculative nature, while the latter acknowledges some practical benefits of Bitcoin in certain economies. This shows a more nuanced and contextual view of the ECB on cryptocurrencies.
If you want to know more detailed information about each document, we show you here a summary with the main points of each:
Bitcoin: The last bastion in the crisis-ridden crypto market
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History: 30 November 2022
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Writers: Ulrich Bindseil and Jürgen Schaaf
In the “Bitcoin’s final stance” report prepared by the European Central Bank (ECB), the current situation of Bitcoin is analyzed. Widespread crisis in cryptocurrency markets Following the crash of a major crypto asset exchange.
Bitcoin’s value reached 1 Top of $69,000 in November 2021It dropped to $17,000 in mid-June 2022 and has fluctuated around $20,000 since then. This apparent stability is seen by some as a respite before reaching new highs, but the report suggests it could instead be an artificial last gasp before a path to irrelevance. FTX’s decline which reduced its price even further.
Since its creation by Satoshi Nakamoto in 2008, Bitcoin has global and decentralized digital currency. But its conceptual design and technological limitations make it questionable as a means of payment, as actual Bitcoin transactions are cumbersome, slow and expensive. Despite the narrative of an inevitable increase in value, Bitcoin has not been significantly used in real-world legal transactions.
Bitcoin in the report not suitable as an investment Since it does not create cash flow, dividends cannot be produced, cannot be used efficiently and cannot provide social benefits. Market valuation is entirely based on speculation fueled by new waves of investors and manipulations by individual exchanges or stablecoin providers.
Large Bitcoin investors have funded lobbyists to influence lawmakers and regulators, especially in the US. misperception of approval and legitimacy around Bitcoin and other crypto assets. The report draws attention to the necessity of effective regulations and controls for these assets according to the risks they represent.
Bitcoin also attracts attention with its negative environmental effects. consuming electricity on the scale of all economies and produces significant amounts of electronic waste. Additionally, the report warns the financial sector about the reputational risks of promoting Bitcoin investments, given that Bitcoin is not suitable as a payment system or form of investment.
This analysis of the ECB you can see it in full herereflected A critical look at the future of BitcoinIt highlights its limitations as a currency and investment asset, as well as the regulatory and environmental challenges it faces.
Working Paper Series: Global and local drivers of Bitcoin versus fiat currencies
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History: October 31, 2023
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Writers: Paola Di Casola, Maurizio Michael Habib, David Tercero-Lucas
The European Central Bank’s report “Global and local drivers of Bitcoin trading versus fiat currencies” (WP2868) analyzes the factors driving Bitcoin trading. Bitcoin transactions against 44 fiat currencies on the largest peer-to-peer (P2P) cryptoasset exchanges.
The study reveals that the Bitcoin market is driven by speculative purposes globally, while Bitcoin in emerging and developing economies (EMDEs) is also transactional benefitsespecially when the local currency is unstable.
The data shows a global crypto cycle in which Bitcoin transactions move with fluctuations in its price, indicating speculative use. Additionally, the depreciation of local currencies in EMDEs appears to encourage Bitcoin trading. As a haven of value or medium of exchange in countries where currencies have lost their purchasing power. These findings point to potential risks to financial stability in developing countries where currencies are unstable and financial development is limited.
This can lead to “cryptification”, i.e. Exchanging local currency for cryptocurrenciesSimilar to the use of the US dollar in countries with high inflation, it poses a challenge for capital flow management policies in these countries.
The study highlights an interesting difference between EMDEs and advanced economies (AEs) in terms of the exchange platforms used. While decentralized peer-to-peer (P2P) exchanges find fertile ground in EMDEs, incumbents in AEs tend to use centralized off-chain exchanges that fall outside the scope of ECB work. This distinction highlights how a country’s economic and financial context can affect it. How cryptocurrencies are adopted and used.
The report highlights the size of the change between currencies in the analysis, which is a new approach in the literature on this subject. It uses a multi-factor analysis that examines the unique characteristics of each country and how they affect Bitcoin transactions. This methodological prism allows: A deeper understanding of both global and local factors Driving Bitcoin trading in different national contexts. In this sense, the study also observes the importance of variables such as banking depth and digitalization, volatility of the global financial market and attention to inflation in the use of Bitcoin.
document, which you can see it in full hereprovides A different perspective on Bitcoinrecognizing both its global speculative use and its transactional benefits in specific contexts, particularly EMDEs.