European Bank: Bitcoin's Fair Value Is 0

Bitcoin has not yet fulfilled its potential as a global decentralized digital currency and its fair value is zero, the ECB chief said.

In a recent analysis, Mr. Ulrich Bindseil - Director in charge of market infrastructure and payments, and senior advisor Jürgen Schaaf of the European Central Bank (ECB) - said that Bitcoin has failed in its promise to become a global decentralized digital currency and is hardly used for legal money transfers.

“The latest approval for ETFs does not change the fact that Bitcoin is not suitable as a means of payment or investment,” two senior ECB officials stressed.

On January 10, the US Securities and Exchange Commission (SEC) approved spot Bitcoin ETFs. The market saw the move as a regulatory endorsement of Bitcoin investments as safe and the previous price surge as evidence of an inevitable victory for investors. However, the ECB leadership disagreed with both views, reiterating that Bitcoin's fair value remains zero.

Lower interest rates will increase investors' risk appetite, and ETF approvals will unleash a flood of Wall Street Bitcoin. Both promise large cash flows, but according to the ECB, they effectively fuel speculative bubbles. In the short term, the inflows can have a big impact on Bitcoin's price, but in the long term, cryptocurrencies will have to return to their fundamental value. The problem is that Bitcoin has no other cash flows or returns, so the fair value of the asset is zero.

The ECB believes that cryptocurrencies have many disadvantages such as high volatility, high costs, slow transactions and high energy consumption in mining. The current price surge is just manipulation in an unregulated market, fueled by growing demand for “criminal currencies” and shortcomings in the judgment and management of authorities.

Regarding investing in Bitcoin, the ECB stressed that it is not suitable because it does not generate any cash flow (unlike real estate) or dividends (stocks), cannot be used productively (commodities), and does not bring social benefits (gold jewelry) or subjective evaluation based on excellence (artworks). "Retail investors with little financial knowledge are attracted by the fear of missing out, making them susceptible to losing money," the ECB expert emphasized.

The European Central Bank has long held a negative view of cryptocurrencies. Last year, the European Union (EU) became the first major jurisdiction to implement a comprehensive regulatory framework for digital assets and related service providers. Meanwhile, the ECB is working to create and promote a digital euro – a trustworthy central bank-issued virtual currency that could provide a secure alternative to private cryptocurrencies.

Ulrich Bindseil concluded that the price of Bitcoin is not an indicator of its sustainability. He stressed that the cryptocurrency still has no fundamental economic data, no reasonable value from which to make serious predictions. "A trillion dollar market capitalization should be understood as a quantification of the damage to society if this bubble bursts," the ECB leader added.

Xiao Gu (according to CoinDesk )

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