The European Central Bank has sharply criticized Bitcoin – BTC is on the “path to irrelevance”

“But rather, this is an artificially induced final gasp before the path to irrelevance – and this was predictable even before FTX collapsed and sent the price of Bitcoin well below $16,000.”

Bitcoin topped $17,000 on Wednesday, a two-week high. However, it failed to hold that level, falling to $16,775 at the time of writing. Vijay Ayyar, vice president of corporate development and international relations at crypto exchange Luno, warned that the rebound would not be permanent.

“It’s just a bearish retest.”

Bindseil and Schaff stated that Bitcoin does not fit the form of investment and is not suitable as a means of payment.

“Bitcoin’s conceptual design and technological shortcomings make it questionable as a means of payment: Bitcoin transactions are cumbersome, slow, and expensive. Bitcoin has never been used to any significant extent for legitimate real-world transactions.”

“Bitcoin is also not suitable as an investment. It does not generate cash flows (like real estate) or dividends (like stocks), cannot be used productively (like commodities) or provide social benefits (like gold). Therefore, the valuation of Bitcoin is based purely on speculation.”

Analysts say the FTX insolvency is likely to accelerate regulation of digital currencies. In the European Union, a new law called Markets in Crypto Assets, or MiCA, is expected to harmonize regulation of digital assets across the bloc.

Bindseil and Schaff said it is important not to confuse regulation with a sign of consent.

“The belief that innovation must be allowed at all costs persists stubbornly. First, these technologies have so far created limited value for society – no matter how great the expectations for the future. Second, the use of a promising technology is not a sufficient condition for the added value of the product based on it.”

They also expressed concerns about Bitcoin's poor environmental record. The technical underpinnings of the cryptocurrency are such that it requires a huge amount of computing power to verify and approve new transactions.

“This inefficiency of the system is not a flaw, but a feature,” said Bindseil and Schaff.

This is not the first time the ECB has raised doubts about digital currencies. ECB President Christine Lagarde said in May that she believed cryptocurrencies had no intrinsic value. Her comments came against the backdrop of a previous scandal in the industry — the multi-billion dollar implosion of the Terra ecosystem.