It is hard to avoid the fear, uncertainty, and doubt (FUD) when markets are tanking hard, so Euro Central Bank (ECB) berating digital assets is nothing new. It begs the question, why do they hate crypto so much?
There are various reasons why central banks, including the Euro Central Bank, and their leaders are staunchly opposed to cryptocurrency. Decentralized digital assets compete with central bank digital currency (CBDC) ideas. Christine Lagarde, ECB President, confirmed this in a subsequent statement:
“The day when we have the central bank digital currency, any digital euro, I will guarantee it. So the central bank will be behind it. I think that is vastly different from any of those things.”
The central bank will have complete power over a CBDC. Because it is based on a blockchain, all transactions will be traceable, giving banks even more control over people’s finances than they already have. Banks cannot control cryptocurrency, which is why they are working hard to have it banned.
Furthermore, a bank’s job is to earn off consumer deposits. They use a fractional reserve system, which implies that the banks lend and invest the money in their customer’s deposits, keeping just a fraction as a reserve. If everyone went to the bank to withdraw on the same day, the bank would fail because the funds are not physically present.
This is exactly what Satoshi Nakamoto warned against when he created Bitcoin (BTC) in the wake of the 2008 financial crisis, which banks essentially caused. The cycle is repeating with rampant inflation ravaging the world and central banks printing more money in the name of stimulus packages that only really devalue the underlying currency.
The current price of a Bitcoin is still just over $30,000, but Lagarde thinks it and other crypto assets are “worth nothing.” In an interview on Dutch TV aired on May 22, the ECB leader said that she has maintained “all along” that cryptos are “highly speculative, very risky assets.” The speculative part is common knowledge, but the banker then went on to declare:
“My very humble assessment is that it is worth nothing. It is based on nothing, there is no underlying assets to act as an anchor of safety.”
As a result of the global economic crisis, bankers have increased their anti-crypto arguments. Lagarde and the ECB urged for stronger crypto regulations earlier this year, citing sanctions evasion as the reason this time.
A major cryptocurrency market crash is nothing new; it occurred in 2018 and before that in 2014, when BTC lost more than 80% of its value before returning to set a new all-time high a year or two later. Currently, Bitcoin Fear and Greed Index is 10, and the market is still in a very cautious trend.
Crypto markets are currently down 56% from their November 2021 peak of just over $3 trillion, so there could be further to go before it hits the bottom of this current cycle.
DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
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