In recent months and especially these days, we have been witnessing a dizzying recovery of Bitcoin. bitcoin recoveryLooks like this is over crypto winter In an environment where the entire sector has been mired since mid-2022, not insignificant news adds to the list of factors favoring revaluation.
In a working paper published on its website, the European Central Bank said: significant change in his vision for the first and main cryptocurrency.
The conclusions of the new report are quite different from those expressed a year ago, when Bitcoin was practically considered dead, amid a whirlwind of bankruptcies and scandals in the crypto world.
Two ECB studies offer very different perspectives. Although both state that they express the viewpoints of their own authors, not those of the institution, such publications have historically been accepted by their authoritative mouthpieces as their road map and media mouthpiece. Like this, “Bitcoin’s last stand” November 2022 focused on the limitations of the largest cryptocurrency, highlighting its volatility, limited use in legal transactions, and speculative nature; recently presented “Global and local drivers of Bitcoin trading versus fiat currencies” (WP2868), in contrast, analyzes their role in emerging and developing economies: “Cryptocurrencies may represent a better store of value than local currencies in countries where inflation is high and the exchange rate tends to depreciate.”
where last year Viability of Bitcoin as a currency or investment, This approval was granted although the speculative aspect of the asset continued to be highlighted, highlighting its negative environmental impact and risks to the financial industry. legitimate processing uses and is useful in certain economic contexts.
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. Therefore, we are faced with a more nuanced and empirical vision of the ECB on cryptocurrencies.
The body responsible for the European Union’s economic and monetary policy noted at the end of last year that Bitcoin had “apparently stabilized” around $20,000 after reaching a maximum of $69,000 in November 2021 and falling to 17,000 twelve months later. It was seen by cryptocurrency advocates as “a respite on the path to new highs.” However, the ECB noted that “this is most likely an artificially induced last gasp on the path to irrelevance” and that, in its view, this situation was “foreseeable” even before the collapse of the exchange platform. then the world’s third largest will send Bitcoin price below $17,000.
Wrong guess
The European Central Bank once again serves as a counter indicator. Since he announced these dire predictions, the Bitcoin price has risen more than 160% and, at the time of this writing, reached $44,000, a level it has not reached since April 2022.
As always, the queen of digital currencies is dragging the rest of the tokens and cryptocurrencies, which number in the thousands, up with her. Ether, the currency of the Ethereum network, which ranks second in market capitalization, has increased by 90% so far this year, while Solana, for example, has grown by at least 540% in 2023.
ECB president Christine Lagarde publicly stated a few weeks ago that she lost 60% of her investment in cryptocurrencies by ignoring the advice of one of her sons. He did not and does not specify when or how much of the asset chosen by his children, but it is notable that he demonized the cryptography industry when it became clear that any bets on regulated trust funds were just as dangerous. Perhaps he should have been advised to invest in shares of Credit Suisse or Silicon Valley Bank.
Irony aside, to understand all this context well, we must remember that the ECB is working on its own version of electronic money, a digital euro that will be born in 2026 at the earliest, in response to cryptocurrencies and whose intended purpose is to prevent The institution loses its hegemonic control over capital exports in the European Union.
I say it where I say it…
In line with Lagarde’s vision for cryptocurrencies, the 2022 report, signed by Ulrich Bindseil and Jürgen Schaaf, emphasized that Bitcoin’s conceptual design and technological “shortcomings” make it “dubious as a means of payment” and that actual transactions with it are “cumbersome.” , slow and expensive.” He added that “despite the story of its inevitable rise in value, Bitcoin is not significantly used in real-world legal transactions.”
On the contrary, global adoption continues. This week, the Swiss city of Lugano officially announced that it has started accepting bitcoin and tether for payment of municipal taxes. Additionally, Société Générale, one of Europe’s most important banks, announced the launch of its own stablecoin (a digital currency backed by a “stable” reserve asset), which will be listed on Bitstamp and other cryptocurrency exchanges.
The 2022 document concluded by warning the financial industry about the reputational risks of promoting crypto investments. A year later, the new report by Paola Di Casola, Maurizio Michael Habib and Spaniard David Tercero-Lucas analyzes the factors driving bitcoin transactions against 44 fiat currencies on the largest P2P cryptoasset exchanges (the type of connection that allows between computers). files or information to be shared without the need for intermediaries). The study notes that in emerging and developing economies, mainstream cryptocurrency offers “transactional benefits,” especially when the local currency is unstable: “it can be widely used by individuals and companies for ordinary transactions or as a store of value, to compensate.” Due to lack of financial alternatives.
optimistic horizon
While we wait to see what the Federal Reserve will decide on monetary policy for 2024 at its next meeting, scheduled for Tuesday and Wednesday, optimism prevails in the crypto sector as several milestones come together. The most important of these is the possible approval of Bitcoin exchange-traded funds (ETFs), a mechanism that in practice would mean an easier and safer way to invest in cryptocurrencies and could, in theory, attract a greater number of institutional and individual investors. Some experts believe that the green light date for these financial instruments may be between January 8-10, 2024.
To this hope for greater regulatory clarity we must also add the imminence of the next Bitcoin halving, expected next April. This event happens every four years and means the amount of Bitcoin miners are rewarded with is halved. This is part of the bitcoin issuance process, which is limited to 21 million coins. There are now just over 1.4 million left to be mined.
As supply decreases, demand and price increase. Bitcoin reached historical price records after previous “halvings” in 2012, 2016 and 2020. This system will continue until 2140, when bitcoin mining will be stopped. Although surely first the ECB will want to “kill” it again.