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Breaking Down the European Central Bank’s Latest Critique of Bitcoin

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The latest blog released by the European Central Bank (ECB) has gained a lot of attention amongst Bitcoiners. Titled “Bitcoin’s last stand,” the blog post contains misleading remarks and statements about Bitcoin on many levels without any supporting evidence or data. 

Below are the main points of contention from the ECB blog about Bitcoin:

1. “Bitcoin Is Rarely Used for Legal Transactions”

The blog post does not provide any details to this claim and discusses the origins of Bitcoin rather than going into detail about how Bitcoin is being used illegally.The 2022 Crypto Crime Report” by Chainalysis showed that in 2021, only 0.15% of Bitcoin and cryptocurrency transaction volume involved illicit addresses. This is the lowest share of illicit transactions ever on record and suggests that these types of transactions are declining.

Moreover, as the Chainalysis report shows, most of these transactions are connected to DeFi and stablecoins with nearly no illicit activity tied to Bitcoin. With more than 250,000 average daily Bitcoin transactions, it is highly unlikely that the majority of them are illegal.

2. “The Value of Bitcoin Peaked at $69,000”

While this claim appears to be correct at face value, the price of Bitcoin denominated in U.S. dollars has peaked around $69,000 for now.

However, the true value of Bitcoin is in the eyes of the beholder. People all around the globe who are being oppressed under totalitarian regimes without adequate rights or freedoms will potentially value Bitcoin not based on its price, but on the ability to transact or purchase goods and services without permission. If they are unable to transact in their local currency, the value of what Bitcoin brings to them is not connected to the fiat denominated price, but rather its utility.

The same goes for inhabitants of countries with double or triple-digit inflation who see their life savings lose purchasing power daily. For them, Bitcoin’s value is far greater than its denominated price in the U.S. dollar. 

This can be seen through adoption in the given countries. According to Chainalysis, countries with high inflation such as Argentina (88%) or Turkey (85%) are amongst the countries with the largest Bitcoin adoption rate in the world.

Source: banklesstimes.com

A clear winner of Bitcoin adoption so far has been Nigeria. This may be for several reasons, but the most crucial one seems to be the government’s push towards the adoption of its CBDC, the eNaira. Recently, the government banned withdrawals of more than $225 a week from ATMs, with a daily limit of $45. While the goal of the Nigerian government is to force the eNaira onto its citizens through steps like these, the people seem to be more inclined to opt out of the system by using Bitcoin. 

3. “Bitcoin Mining Is Estimated To Consume Electricity per Year Comparable to Austria”

No comparison was included in the blog post for how much energy the traditional financial system, or other industries, use or what percentage is renewable energy. For instance, as shown by the Bitcoin Mining Council’s Q2 2022 report, the sustainable electricity mix of the global Bitcoin mining industry is currently 59.5% which is significantly higher than any other industry. 

Moreover, as the research of Cambridge Centre for Alternative Finance shows, Bitcoin energy consumption is estimated to be 0.13% of the global energy production. While nobody claims that Bitcoin does not use energy, stating statistics without any additional context or data is misleading for readers.

Final Thoughts

While the ECB and other central banks are attacking Bitcoin directly or indirectly, its adoption has only been increasing around the world. From El Salvador to Turkey to Nigeria and many other countries, people are slowly voting with their money, casting their ballots for Bitcoin.

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