The ECB says bitcoin will be irrelevant

According to the European Central Bank, bitcoin is "on the road to irrelevance."

On Wednesday, the European Central Bank gave bitcoin a harsh review, saying that it is "on the road to irrelevance."

In a blog post called "Bitcoin's Last Stand," ECB Director General Ulrich Bindseil and Analyst Jürgen Schaff said that the price of bitcoin seems to have stabilised this week, which "signals a breather on the way to new heights" for bitcoin supporters.

"More likely, however, it is an artificially induced last gasp before the road to irrelevance," they wrote. "This was already known before FTX went bankrupt and sent the price of bitcoin well below USD16,000."

Bitcoin's price went over $17,000 on Wednesday, making it the highest it's been in two weeks. But it was hard for it to stay at that level, and it went down to $16,875. Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, said that the bounce is probably just a bear market rally and won't last.

The ECB officials' comments come at a good time, as the crypto industry is still reeling from one of its worst failures in recent memory: the collapse of FTX, an exchange that was once worth $32 billion. And because the Federal Reserve has raised interest rates this year, the market has been mostly down this year.

Bindseil and Schaff said that bitcoin was neither a good investment nor a good way to pay for things.

"Bitcoin isn't a good way to pay because of how it was designed and what it can't do," they wrote. "Real Bitcoin transactions are hard, slow, and expensive." "Bitcoin has never been used in a big way for legal transactions in the real world."

"Bitcoin is also not a good way to make money." It doesn't make money (like real estate) or pay dividends (like stocks), can't be used to make money (like commodities), and doesn't help society (like gold). "So, the only way to figure out how much Bitcoin is worth on the market is to guess," they said.

Analysts say that the failure of FTX will likely speed up the process of regulating digital currencies. A new law in the European Union called Markets in Crypto Assets, or MiCA, is meant to make sure that digital assets are regulated the same way everywhere in the bloc.

Bindseil and Schaff both said that regulation shouldn't be taken as a sign of approval.

They said, "The idea that space must be given to innovation at all costs is still very strong."

"First of all, these technologies haven't done much for society so far, no matter how high the hopes are for the future. Second, just because a product is made with a promising technology doesn't mean that it has more value.

They also worried about how bad bitcoin is for the environment. Because of how cryptocurrency works technically, it needs a huge amount of computing power to check and approve new transactions. Ethereum, the network behind ether, a cryptocurrency that competes with bitcoin, just switched to a new framework that supporters say will cut its energy use by more than 99%.

Bindseil and Schaff said, "This system's inefficiency is not a flaw but a feature." "It is one of the unique things that makes sure the completely decentralised system works well."

It's not the first time the ECB has raised questions about digital currencies. In May, Christine Lagarde, the head of the European Central Bank, said that she thinks cryptocurrencies are "worth nothing." Her comments came after another scandal in the industry: the collapse of the so-called stable coin terraUSD, which cost billions of dollars.