European Central Bank: Bitcoin ETF is like the Emperor's New Clothes, BTC's fair value remains zero

The European Central Bank likened Bitcoin ETF to "The Emperor's New Clothes" in a recent article, criticizing the recent rebound as a temporary illusion of prosperity. The ECB sarcastically pointed out that while Bitcoin aims to challenge the demonized traditional financial system, it ultimately relies on traditional intermediaries to reach a broader base of investors.

Original article: "ETF approval for bitcoin – the naked emperor’s new clothes".

ETF Cannot Turn Bitcoin from Red to Black

The European Central Bank's Director General of Market Infrastructure and Payments, Ulrich Bindseil, and advisor Jürgen Schaaf, wrote that even with the introduction of Bitcoin ETFs, Bitcoin has yet to fulfill its promise of becoming a "global decentralized digital currency" and remains difficult to use for legitimate transactions. The ETF has not changed the fact that Bitcoin is not suitable as a "means of payment" or "investment."

The ECB stated:

The rise in Bitcoin brought about by ETFs does not prove that Bitcoin's success is unstoppable. We reiterate that the "fair value of Bitcoin remains zero," and Bitcoin's prosperity cycle presents a grim outlook, resulting in significant harm, including environmental damage and wealth redistribution at the expense of novice traders.

The ECB stated that the risks associated with Bitcoin that they mentioned in their 2022 article "Bitcoin’s last stand" have now become a reality:

• Illegal payments remain the primary use: Even though El Salvador granted BTC legal tender status, it has not made Bitcoin a widely accepted payment method.

• Bitcoin is still not suitable for investment: No cash flow like real estate, dividends like stocks, difficult to use, and lacks social value like gold jewelry.

• Environmental pollution: The proof-of-work consensus mechanism on which Bitcoin is based has an environmental impact equivalent to that of a country.

Central Bank Analysis: How Did This Dead Cat BTC Jump So High?

The ECB believes factors contributing to the rise in Bitcoin include:

• Mining rewards halving

• SEC approval of spot ETFs

• Expectations of a rate cut by the Federal Reserve

Nevertheless, the ECB emphasizes that the rise in BTC may still be short-lived.

Will Bitcoin Ultimately Rely on Traditional Financial Recognition?

The ECB sarcastically suggests that while Bitcoin aims to challenge the demonized traditional financial system, it ultimately relies on traditional intermediaries to reach a broader group of investors.

The conclusion mentions that Bitcoin's price levels are not sustainable, lack fundamental economic data to speculate fair value, and are difficult to prove rationality in speculative bubbles.

The ECB urges governments:

Authorities must remain vigilant to protect society from money laundering, cyber-related crimes, as Bitcoin will cause economic losses to those with low financial education and significant environmental damage, a task that is yet to be completed.

In the context of the entire article's argument, "this task" seems to refer to the banishment of Bitcoin by various countries due to its extensive use in criminal activities.