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What The ECB Gets Wrong About Bitcoin

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Follow Frank on X.

Last week, Ulrich Bindseil and Jürgen Schaaf of the European Central Bank (ECB) published a paper entitled “The distributional consequences of Bitcoin” in which they made a host of dubious claims about Bitcoin.

The notions that those who are late to investing in bitcoin are impoverished by those who were early to investing in it and that Bitcoin has failed as a payments technology are the authors’ central arguments.

Bitcoin analyst Tuur Demeester sounded the alarm about the report on X.

As a former academic, I was appalled at how lazy the arguments in this paper were. Hence, I’ve taken the time to push back on some of them.

  • The main premise of the paper is that if bitcoin’s price continues to rise, early bitcoin investors — the “early birds” (the authors’ term) — will gain wealth at the expense of the “latecomers.” While this is true if the early birds hold all of their coins to no end, the dynamic is no different with any other publicly-traded asset. The bigger point that the researchers miss, though, is that some of us are both “early birds” and “latecomers.” I first bought bitcoin in January 2018, and I also bought some last week. Did I impoverish myself in this scenario? No, I didn’t. Nor has anyone who has dollar-cost averaged into bitcoin over any period of time. Also, I bought some gold earlier this year. After doing so, I didn’t shake my fist at the sky yelling “Damn all of you who have front run me to gold over the last 5,000 years!” I simply made the purchase in efforts to preserve my wealth in a highly inflationary environment — one that the ECB itself is partially responsible for causing — and went about my day.
  • One of the other primary arguments in the paper is that Bitcoin has failed as a payment technology. In making this claim, the authors fail to even mention the Lightning Network, a layer built on top of Bitcoin that enables fast, cheap bitcoin payments. In recent years, the Lightning Network has grown exponentially. From August 2021 to August 2023, the network grew by 1212% — which occurred mostly during a bitcoin bear market. Major players from the world of traditional payments are building on Lightning, as well. A prominent example of this is David Marcus, former President of PayPal, who is the current CEO of Lightspark, which is building enterprise-ready payments infrastructure via the Lightning Network. Beyond Lightning, Bitcoin is still quite young and will likely need to be more fully monetized (less volatile in fiat money terms) before people begin using it more frequently using it as money.
  • Throughout the piece, the authors bring up how bitcoin and other cryptocurrencies are the preferred currencies of criminals and bad actors worldwide. While there’s little evidence that proves this to be the case, as methodology of Chainanalysis — the blockchain analysis firm often employed to look into crypto and criminal activity — is questionable at best. Terrorist organizations like Hamas have stopped relying on crypto donations because of their traceability. With that said, TD Bank was just fined $3 billion for enabling money laundering, while Wells Fargo is currently in the crosshairs of regulators for doing the same. And data shows that criminals prefer cash above all else when committing crimes. Lastly, I made two purchases last week with bitcoin and I can assure you that neither were illegal. And I’m not the only one who recently made perfectly legal purchases with bitcoin.
  • The authors also make the claim Bitcoin is a threat to democracy because crypto PACs now donate to politicians. The presupposes that every other lobbying group out there isn’t a threat to democracy, which is laughable. What the authors also missed is that bitcoin is often a money of last resort for pro-democracy activists who’ve been debanked by authoritarian regimes. One of the first moves in the modern dictator’s playbook is to cut dissidents off from the traditional financial system. In these cases, pro-democracy activists have to rely on bitcoin and other cryptocurrencies. Alexei Navalny, Vladimir Putin’s former opposition, popularized using cryptocurrencies for donations when the Putin regime limited its access to traditional financial rails.
  • The authors also suggest that central banks can just tighten monetary policy to counteract the “bubble” forming in bitcoin’s price. The last two years have proven that this isn’t true, as rates are just about the highest they’ve been in over a decade and a half, yet bitcoin’s price is still on the verge of approaching an all-time high in US dollar terms. Plus, tightening from the US Federal Reserve, the central bank of the US, led to the collapse of Silicon Valley Bank (SVB) as well as other banks in 2023, highlighting the fact that tightening makes the traditional financial system more fragile. This only makes a stronger case for people to store their wealth outside of the traditional system in an asset like bitcoin.

Beyond these points, the tone of this paper from the ECB is paternalistic in that it suggests that all retail investors are incapable of learning more about how markets work and why Bitcoin is important.

Toward the end of the report, Bindseil and Schaaf cite a source that claims that “unsophisticated investors are drawn into the market” as the bitcoin bubble grows, seemingly suggesting that everyone one of these retail investors only buys at the top and sells toward the bottom of a drawdown.

I was once one of those unsophisticated retail investors, and while I first bought bitcoin near its 2017 top, I also bought it on dozens of other occasions, including when its price dipped to local lows in 2018 and 2020. I did so because in studying Bitcoin and learning what problems it solves I came to place more faith in it than I did in the traditional monetary and financial systems.

There are many others like me, and I’d imagine that they too take offense to the ECB’s diminishing their intellectual capabilities and writing deeply biased reports that misrepresent what Bitcoin is and the reasons why people invest in and adopt it.





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Robert Kiyosaki Hints At Economic Depression Ahead, What It Means For BTC?

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Rich Dad Poor Dad author Robert Kiyosaki has issued a stark warning while hinting towards an economic depression ahead. In a recent X post, the renowned author said that the global market crash has already started, as he predicted earlier, which indicates that the financial market might enter a “depression” phase. Notably, this comes as the crypto market records immense volatility, sparking concerns over what’s next for Bitcoin (BTC).

Robert Kiyosaki Hints At Economic Depression Ahead

Robert Kiyosaki, in a recent X post, has revealed a stark warning of a looming economic depression. The Rich Dad Poor Dad author warned that a global market crash has already begun, citing Europe, China, and the U.S. as regions facing significant downturns.

In his post, Kiyosaki urged caution, advising individuals to safeguard their finances and maintain their jobs. “Global crash has started. Europe, China, USA going down. Depression ahead?” he asked while emphasizing the enduring value of assets like gold, silver, and Bitcoin. He added, “For many people, crashes are the best times to get rich.”

This warning aligns with Kiyosaki’s earlier prediction of what he called the “biggest crash in history.” Earlier this month, he encouraged his followers to prepare for financial turmoil, stating, “Please be proactive and get rich… before the BOOMER’s go BUST.”

However, this recent comment from Robert Kiyosaki indicates his sustained confidence in BTC. As the crypto market faces heightened volatility, Bitcoin could emerge as a hedge against traditional market instability, he noted. Besides, it also indicates that the flagship crypto, alongside gold and silver, might continue to gain traction amid this economic turmoil.

What’s Next For BTC?

Bitcoin price today has continued its volatile trading, losing nearly 1.5% over the last 24 hours to $95,323. The crypto touched a high and low of $97,260 and $93,690 in the last 24 hours, showcasing the highly volatile scenario in the market.

In addition, the US Spot Bitcoin ETF also recorded significant outflow, with BlackRock Bitcoin ETF witnessing its largest outflux since its launch. This has weighed on the investors’ sentiment, sparking concerns over a waning institutional interest.

However, despite that, many experts remained confident on the asset’s future trajectory. For context, in a recent X post, Peter Brandt shared a new BTC price target, indicating his confidence in the digital asset.

On the other hand, institutions like Metaplanet have also continued to boost their BTC holdings. These moves indicates that the institutions, as well as many investors, are bullish towards the long-term potential of the crypto. Besides, as Robert Kiyosaki said, the recent dip also provides a buying opportunity to investors, which might further boost Bitcoin to its new ATH ahead.

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Rupam Roy

Rupam is a seasoned professional with three years of experience in the financial market, where he has developed a reputation as a meticulous research analyst and insightful journalist. He thrives on exploring the dynamic nuances of the financial landscape. Currently serving as a sub-editor at Coingape, Rupam’s expertise extends beyond conventional boundaries. His role involves breaking stories, analyzing AI-related developments, providing real-time updates on the crypto market, and presenting insightful economic news.
Rupam’s career is characterized by a deep passion for unraveling the complexities of finance and delivering impactful stories that resonate with a diverse audience.

Disclaimer: The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.





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Bitcoin

Metaplanet makes largest Bitcoin bet, acquires nearly 620 BTC

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Tokyo-listed Metaplanet has purchased another 9.5 billion yen ($60.6 million) worth of Bitcoin, pushing its holdings to 1,761.98 BTC.

Metaplanet, a publicly traded Japanese company, has acquired 619.7 Bitcoin as part of its crypto treasury strategy, paying an average of 15,330,073 yen per (BTC), with a total investment of 9.5 billion yen.

According to the company’s latest financial disclosure, Metaplanet’s total Bitcoin holdings now stand at 1,761.98 BTC, with an average purchase price of 11,846,002 yen (~$75,628) per Bitcoin. The company has spent 20.872 billion yen in total on Bitcoin acquisitions, the document reads.

The latest purchase is the largest so far for the Tokyo-headquartered company and comes just days after Metaplanet issued its 5th Series of Ordinary Bonds via private placement with EVO FUND, raising 5 billion yen (approximately $32 million).

The proceeds from this issuance, as disclosed earlier, were allocated specifically for purchasing Bitcoin. These bonds, set to mature in June 2025, carry no interest and allow for early redemption under specific conditions.

Metaplanet buys dip

The company also shared updates on its BTC Yield, a metric used to measure the growth of Bitcoin holdings relative to fully diluted shares. From Oct. 1 to Dec. 23, Metaplanet’s BTC Yield surged to 309.82%, up from 41.7% in the previous quarter.

Bitcoin itself has seen strong performance this year, climbing 120% and outperforming assets like the Nasdaq 100 and S&P 500 indices. However, it has recently pulled back from its all-time high of $108,427, trading at $97,000 after the Federal Reserve indicated only two interest rate cuts in 2025.

Despite the retreat, on-chain metrics indicate that Bitcoin is still undervalued based on its Market Value to Realized Value (MVRV-Z) score, which stands at 2.84 — below the threshold of 3.7 that historically signals an asset is overvalued.



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Altcoin Season

End of Altcoin Season? Glassnode Co-Founders Warn Alts in Danger of Lagging Behind After Last Week’s Correction

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The creators of the crypto analytics firm Glassnode are warning that altcoins could lose all bullish momentum following last week’s market correction.

Jan Happel and Yann Allemann, who go by the handle Negentropic on the social media platform X, tell their 63,400 followers that “altcoin season,” which they say began in late November, could come to an abrupt end after alts witnessed deep pullbacks over the last seven days.

According to the Glassnode co-founders, traders and investors will likely have a risk-off approach on altcoins unless Bitcoin recovers a key psychological price point.

“Is This the End of Altcoin Season?

Bitcoin dominance is surging after dipping below $100,000, while altcoins are losing critical supports. Dominance has risen and resumed its upward trend, signaling a stronger BTC environment.

If BTC stabilizes above $100,00, we might see a pump in altcoins now in accumulation zones. Until then, Bitcoin appears poised to lead, leaving altcoins lagging behind.”

Image
Source: Negentropic/X

The Bitcoin Dominance (BTC.D) chart tracks how much of the total crypto market cap belongs to BTC. In the current state of the market, a surging BTC.D suggests that altcoins are losing value faster than Bitcoin.

At time of writing, BTC.D is hovering at 59%.

Looking at Bitcoin itself, the Glassnode executives say long-term Bitcoin holders are massively unloading their holdings as other investor cohorts pick up the slack.

“The Board Keeps Shifting. 

As BTC continues flowing out of exchanges during this dip, long-term holders are exiting forcefully, while short-term holders step in without hesitation.

Whales quietly accumulate, miners remain neutral, and selling pressure has merely reshuffled the board.

New hands are absorbing the sales.”

Image
Source: Negentropic/X

At time of writing, Bitcoin is worth $97,246.

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Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any losses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.

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