• Bitcoin has zero value and the approval of ETFs in the US doesn’t change that, the ECB said. 
• In a blog, experts at the central bank said the crypto poses risks to the environment and enables criminal activity. 
• They said the latest rally in crypto prices threatens “massive” collateral damage to society. 

The cryptocurrency market may be feeling like it just got a stamp of approval to go mainstream with the debut of spot bitcoin ETFs in the US, but the European Central Bank says don’t be fooled. Bitcoin is still a long con. 

Analysts at ECB described last month’s approval of bitcoin ETFs as “the naked emperor’s new clothes” in a blog post on Thursday, reiterating their long-standing view that the cryptocurrency has no real value and is likely the cause of more problems than it solves. 

Those problems include environmental damage and the redistribution of wealth to the detriment of those who may have less understanding of the market. 

“For disciples, the formal approval confirms that Bitcoin investments are safe and the preceding rally is proof of an unstoppable triumph. We disagree with both claims and reiterate that the fair value of Bitcoin is still zero,” the ECB’s Ulrich Bindseil and Jürgen Schaaf said in the blog post, warning investors of an unruly reinflating of the “bitcoin bubble.”

The ECB experts said bitcoin falls short in generating cash flow or other value-based returns, making it a poor investment. Crowing cybercrime activity that exploits the anonymity of digital currency further erodes its potential use case as an everyday payment method. Moreover, bitcoin mining through the proof-of-work mechanism continues to pose environmental concerns.

“Alas, all these risks have materialized,” the note said. 

The Securities and Exchange Commission gave the green light for 11 US spot Bitcoin ETFs in January. The investment vehicles have been touted an easier entry point for investors to gain exposure to the world’s largest crypto, and helped propel the total cryptocurrency market cap to $2 trillion for the first time since April 2022.

“For society, a renewed boom-bust cycle of Bitcoin is a dire perspective. And the collateral damage will be massive, including the environmental damage and the ultimate redistribution of wealth at the expense of the less sophisticated,” they wrote. 

Bindseil and Schaaf attributed the bitcoin craze to the unbridled price manipulation, the surge in demand for the “currency of crime,” and authorities grappling with how to police the space. They added that expected rate cuts from the Federal Reserve this year and the upcoming halving event would add fuel to the rally. 

“Still, this could turn out to be a flash in the pan. While in the short run the inflowing money can have a large impact on prices irrespective of fundamentals, prices will eventually return to their fundamental values in the long run,” they wrote in the note.

“Detached from economic fundamentals every price is equally (im)plausible – a fantastic condition for snake oil salesmen.”

The officials also called on authorities to keep their guard up when it comes to monitoring bitcoin-related crime, saying that “this job has not been done yet.”

“The ‘market’ capitalisation quantifies the overall social damage that will occur when the house of cards collapses.”