The seeming stabilization of the price of Bitcoin (BTC) at levels around $20,000 in the months before the FTX collapse was “an artificially induced last gasp before the road to irrelevance.”

Moreover, this was “already foreseeable” before the fallout of the crypto exchange, which last week sent BTC to a two-year low of under $16,000, according to the European Central Bank (ECB).

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In a blog post, ECB’s Market Infrastructure & Payments Director General Ulrich Bindseil and advisor Jürgen Schaff also argue that “Bitcoin's conceptual design and technological shortcomings make it questionable as a means of payment.”

According to Bindseil and Schaff, Bitcoin transactions are “cumbersome, slow and expensive,” which they say explains why the world’s largest cryptocurrency—created to overcome the existing monetary and financial system—"has never been used to any significant extent for legal real-world transactions.”

Bitcoin 'should not be legitimized'

The authors also compared Bitcoin’s historical price cycles to speculative bubbles, which rely on new money flowing in.

“Bitcoin has also repeatedly benefited from waves of new investors. The manipulations by individual exchanges or stablecoin providers etc., during the first waves are well documented,” reads the blog.

Bindseil and Schaff added that since Bitcoin is neither an effective payment system nor a form of investment, “it should be treated as neither in regulatory terms and thus should not be legitimized.”

“Similarly, the financial industry should be wary of the long-term damage of promoting Bitcoin investments - despite short-term profits they could make (even without their skin in the game),” reads the blog, pointing to reputational risks for financial institutions.

Notably, today’s blog post went live the next day after Brazil, the world’s seventh most populous country, passed a law legalizing cryptocurrencies like Bitcoin as means of payment.

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Co-author Bindseil has earlier published several research papers on CBDCs, an acronym for central bank’s digital currencies—digital versions of a state’s fiat currency.

ECB itself is playing an active role in developing the digital euro, with president Christine Lagarde stating that a European CBDC could complement traditional cash and "provide an alternative to private digital currencies" like Bitcoin.

According to ECB’s research last year, CBDCs could also help lower banks' interest rates, make transactions smoother and faster, and minimize cash use.

Many crypto proponents, however, argue that CBDCs bear significant risks, such as the elimination of financial privacy, increased surveillance over individuals, and the ability to block or censor any transaction.

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