The European Central Bank (ECB) sparked controversy on February 22 when it referred to Bitcoin as a ‘dead cat’ and raised concerns about its association with criminal activities on the darknet. This statement prompted strong criticism from the cryptocurrency community, which has raised doubts about the ECB’s position and credibility.
Bitcoin Failed In Its Original Promise
Ulrich Bindseil and Jürgen Schaaf, in their recent blog post, criticized Bitcoin for its failure to live up to its initial promise as a global decentralized digital currency, according to the European Apex bank. The ECB argued that Bitcoin has not achieved widespread adoption and has limited legitimate use cases.
Additionally, the institution addressed concerns regarding Bitcoin mining, highlighting the environmental impact of transaction validation on the network due to its reliance on the energy-intensive proof-of-work (PoW) consensus mechanism. The ECB emphasized that the energy demands of the PoW network rival those of some small countries, with higher Bitcoin prices leading to increased power consumption as miners compete to solve cryptographic puzzles.
Moreover, the ECB pointed out that Bitcoin lacks characteristics of a suitable investment vehicle, as it does not provide consistent cash flow for easy liquidity access. It suggested that the price of Bitcoin is largely influenced by fear of missing out (FOMO) among less knowledgeable retail investors who join the cryptocurrency trend.
The ECB further expressed skepticism regarding the validity of the US Securities and Exchange Commission’s (SEC) decision to approve a spot Bitcoin exchange-traded fund (ETF), arguing that ETF approval does not change the fact that Bitcoin’s fair value remains zero, according to their assessment.
X’s Community Note Debunk the ECB’s Claims
The ECB’s post on X (formerly Twitter) sparked significant controversy, particularly when X’s Community Note feature entered the conversation, countering several of the European agency’s assertions about the leading cryptocurrency.
The “X Community Note” feature, an interactive tool on the X platform, allowed users to offer comments or annotations on posts, providing additional insights and context.
Responding directly to the ECB’s post, the Community Note highlighted that only 0.34% of total cryptocurrency transactions were linked to criminal activities, with Bitcoin’s involvement representing less than 25% of this figure, contrasting starkly with the 110 billion euros associated with criminal enterprises in 2010.
Moreover, the Community Note reiterated the broader cryptocurrency market’s belief that the Bitcoin network serves as an open monetary protocol and a credible store of value. It referenced reports indicating a decline in the purchasing power of the Euro currency and positioned Bitcoin as a driver for transitioning the global economy towards renewable energy sources.
The ECB’s claims also faced significant pushback from the crypto community, with notable figures like Ryan Selkis, crypto evangelist and Messari co-founder and CEO, expressing skepticism. Selkis quoted the ECB’s post with a bold assertion, stating, “The Euro will be dead in 4-5 years. Bitcoin will be alive and well as long as nodes exist that run the Bitcoin core client.”
Another user highlighted the stark devaluation of the Euro relative to Bitcoin over the past decade, noting that the Euro has lost 99.5% of its value compared to Bitcoin.
Furthermore, the user pointed out a striking statistic: 97% of all trading days result in profit for Bitcoin investors. This suggests that those who have held the cryptocurrency over the last decade have enjoyed significantly stronger returns compared to utilizing Euro-backed investment vehicles.
