Bitcoin (BTC-USD) recently broke above $50,000. What’s your response? Will you hate or celebrate? One group of central bankers definitely isn’t celebrating, but their “bubble” warning shouldn’t deter stalwart BTC believers in 2024.
Investors are effectively forced to pick a side now. You can join the pro-Bitcoin camp along with financial giants like BlackRock (NYSE:BLK) and Fidelity. Or, you can miss out on the BTC rally that’s currently in progress. Just don’t complain in six months or a year, when you’ll be tempted to buy Bitcoin at much higher prices.
Bitcoin Harshly Criticized, Said to Be Worth ‘Zero’
U.S. Securities and Exchange Commission Chairman Gary Gensler is no fan of BTC. Yet, Gensler and the SEC couldn’t resist the groundswell of pro-Bitcoin support forever. Eventually, the SEC relented and reluctantly approved spot Bitcoin exchange-traded funds.
Apparently, the European Central Bank wants to let the world know that, despite the SEC’s spot Bitcoin ETFs approvals, the ECB isn’t going to give its blessing to Bitcoin. ECB Director General Ulrich Bindseil and advisor Jürgen Schaaf just released a blog posting declaring that “the fair value of Bitcoin is still zero.”
Such a harsh diatribe from central bankers is unusual. In the same blog post, Bindseil and Schaaf predicted that Bitcoin’s “collateral damage will be massive” and suggested that BTC is in a “speculative bubble.”
Interestingly, in a footnote, Bindseil and Schaaf refer to “the first Bitcoin bubble in 2013.” That year, Bitcoin shot up to $1,000, which undoubtedly seemed like a sky-high price at the time.
Do Bindseil and Schaaf secretly wish that they had bought Bitcoin during the 2013 “bubble”? Since then, its price has increased 50x (or more accurately, 49x) from $1,000 to $50,000.
Fact vs. Opinion
Bindseil and Schaaf also proclaimed, “The latest approval of an ETF doesn’t change the fact that Bitcoin is not suitable as means of payment or as an investment.” Of course, that’s not a “fact” at all. It’s just an opinion.
Meanwhile, plenty of people around the world have used BTC for various purposes. For some people, it’s a hedge against the devaluation of certain fiat currencies.
Take the Japanese yen, for example. BTC recently reached an all-time high against the yen. As a CoinDesk report implies, this probably has something to do with “[c]ontinued money printing by Bank of Japan and resurgent inflation,” which have “weakened sentiment around the Japanese yen.”
The “[c]ontinued money printing” is a fact, not an opinion. And here’s another fact: BTC has a hard limit of 21 million currency units. No government or central bank can order the printing of more Bitcoins.
Some folks might even argue that certain fiat currencies, and not Bitcoin, are heading toward “zero” value. That’s a whole other debate that would open a can of worms. What’s important here is to know the difference between fact and opinion, which seems to be a sticking point for certain central bankers.
BTC Does Have Value, and It’s Growing
The ECB officials are certainly entitled to their opinions. That’s all they are, though, just opinions. It’s not a “fact” that BTC isn’t suitable as an investment.
Whether Bitcoin is in a “bubble” and will cause “massive” damage remains to be seen. If it was in a “bubble” in 2013 at $1,000, though, then I would gladly go back and buy at the top of that bubble.
In any case, the ECB can’t stop people from buying Bitcoin and the ETFs that track it. Money is flowing rapidly into the cryptocurrency space whether the central bankers like it or not. So, if you’re on board with an inflation-resistant asset that has withstood a decade of “bubble” accusations, feel free to put some Bitcoin (or a Bitcoin ETF) in your portfolio today.
