(Bloomberg) — Bitcoin is still a pernicious phenomenon with no intrinsic value despite its US approval as an asset for inclusion in Exchange-Traded Funds, two European Central Bank staff members wrote.
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The blogpost on Thursday by Ulrich Bindseil, the Frankfurt institution’s market infrastructure and payments director general, and Juergen Schaaf, an adviser, reiterates their long-held view that the digital currency presents risks to both society and the environment.
“For disciples, the formal approval confirms that Bitcoin investments are safe and the preceding rally is proof of an unstoppable triumph,” the officials said. “We disagree with both claims and reiterate that the fair value of Bitcoin is still zero.”
The Securities and Exchange Commission approved the first US spot Bitcoin ETFs in January in the wake of a court defeat last year. The group of 10 portfolios has attracted a net inflow of $5.2 billion since going live. The price of Bitcoin itself has soared, an increase Bindseil and Schaff said could prove short-lived.
“Without any cash flow or other returns, the fair value of an asset is zero,” they wrote. “Detached from economic fundamentals every price is equally (im)plausible — a fantastic condition for snake oil salesmen.”
The authors cited three reasons for Bitcoin’s resilience: “the ongoing manipulation of the ‘price’ in an unregulated market without oversight and without fair value, the growing demand for the ‘currency of crime,’ and shortcomings in the authorities’ judgments and measures.”
Bindseil and Schaaf observed that the main thing the overall value of Bitcoin assets shows is the extent of the potential fallout if it all ends in tears.
“‘Market’ capitalization quantifies the overall social damage that will occur when the house of cards collapses,” they wrote. “It is important for authorities to be vigilant and protect society from money laundering, cyber and other crimes, financial losses for the financially less educated, and extensive environmental damage. This job has not been done yet.”
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