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All the excitement surrounding the regulatory approval of multi-spot Bitcoin exchange-traded funds (BTC-USD) last month “does not change the fact that Bitcoin is neither suitable as a means of payment nor as an investment,” said two European Central Bank officials wrote in a recent blog post.
“Then why is this dead cat jumping so high?” ECB Director General of Market Infrastructure and Payments Ulrich Bindseil and advisor Jürgen Schaaf asked, pointing to the ETF-driven crypto market rally that took a breather last week.
Year-to-date, Bitcoin (BTC-USD) is up 16.5% from $44.9K on Jan. 1, after consolidating in the narrow $51.6K-$52.2K range since mid-February . The token is up 113% year over year, a move helped by bullish bets ahead of the Securities and Exchange Commission's spot ETF approval as well as the Federal Reserve's dovish policy shift late last year.
The ETF approval opened the floodgates to Bitcoin (BTC-USD) to retail investors and Wall Street, with billions of dollars pouring into such products in the less than two months since its launch. However, ECB officials argued that the ETFs do not directly make Bitcoin (BTC-USD) more valuable, but instead offer market participants another way to speculate on the token without an intermediary.
“The problem has never been a lack of opportunities to speculate in Bitcoin – but rather that it is all about speculation,” they said. Overall, the authors claimed that Bitcoin (BTC-USD) was in a speculative bubble and reiterated that “the fair value of Bitcoin is still zero.”
ETFs that invest directly in Bitcoin (BTC-USD) include: (GBTC) (EZBC) (IBIT) (BRRR) (BTCO) (BTCW) (FBTC) (ARKB) (BITB).
The European Union, meanwhile, is a major player in crypto regulation, introducing a comprehensive regulatory framework for digital asset and crypto service providers last year. Additionally, the ECB has focused on developing a central bank-issued digital euro to provide a secure replacement for private cryptocurrencies.
“The ongoing manipulation of the ‘price’ in an unregulated market with no supervision and no fair value, the growing demand for the ‘currency of crime’ and deficiencies in the judgments and actions of the authorities” are the three structural reasons for the recent cryptocurrency rally, it said in the blog.
The average SA analyst has been bullish on Bitcoin (BTC-USD) since November 21, 2023, with some recommending buying the token ahead of the halving. The event, expected to take place in mid-April, comes when the block reward given to BTC miners for processing transactions will be halved, effectively reducing the number of new Bitcoins entering the market. History shows that the price of BTC has increased after many halving events that occur approximately every four years. On Wednesday, SA analyst Nicholas Kitonyi took a neutral stance on the highly anticipated event, laying out reasons to buy – or not buy – BTC ahead of the halving.
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