European Central Bank says bitcoin is on the 'road to irrelevance'

The European Central Bank gave a beardown critique of bitcoin connected Wednesday, saying the cryptocurrency is connected a "road to irrelevance."

In a blogpost titled "Bitcoin’s past stand," ECB Director General Ulrich Bindseil and Analyst Jürgen Schaff said that, for bitcoin's proponents, the evident stabilization successful its terms this week "signals a breather connected the mode to caller heights."

"More likely, however, it is an artificially induced past gasp earlier the roadworthy to irrelevance — and this was already foreseeable earlier FTX went bust and sent the bitcoin terms to good beneath USD16,000," they wrote.

Bitcoin topped $17,000 Wednesday, marking a two-year precocious for the world's largest integer coin. However, it struggled to support that level, falling somewhat to $16,875. Vijay Ayyar, vice president of firm improvement and planetary astatine crypto speech Luno, warned that the bounce is apt conscionable a carnivore marketplace rally and would not beryllium sustained. "This is conscionable a bearish retest," helium told CNBC.

The remarks from the ECB officials are timely, with the crypto manufacture reeling from 1 of its astir catastrophic failures successful caller past — the downfall of FTX, an speech erstwhile valued astatine $32 billion. And the marketplace has been mostly down successful the dumps this twelvemonth amid higher involvement rates from the Federal Reserve.

Bindseil and Schaff said that bitcoin didn't acceptable the mold of an concern and wasn't suitable arsenic a means of payment, either.

"Bitcoin's conceptual plan and technological shortcomings marque it questionable arsenic a means of payment: existent Bitcoin transactions are cumbersome, dilatory and expensive," they wrote. "Bitcoin has ne'er been utilized to immoderate important grade for ineligible real-world transactions."

"Bitcoin is besides not suitable arsenic an investment. It does not make currency travel (like existent estate) oregon dividends (like equities), cannot beryllium utilized productively (like commodities) oregon supply societal benefits (like gold). The marketplace valuation of Bitcoin is truthful based purely connected speculation," they added.

Analysts accidental that FTX's insolvency is apt to hasten regularisation of integer currencies. In the European Union, a new instrumentality called Markets successful Crypto Assets, oregon MiCA, is expected to harmonize regularisation of integer assets crossed the bloc.

Bindseil and Schaff said it was important not to mistake regularisation arsenic a motion of approval.

"The content that abstraction indispensable beryllium fixed to innovation astatine each costs stubbornly persists," they said.

"Firstly, these technologies person truthful acold created constricted worth for nine — nary substance however large the expectations for the future. Secondly, the usage of a promising exertion is not a capable information for an added worth of a merchandise based connected it."

They besides raised concerns with bitcoin's mediocre biology credentials. The cryptocurrency's method underpinnings are specified that it requires a monolithic magnitude of computing powerfulness successful bid to verify and o.k. caller transactions. Ethereum, the web down bitcoin rival ether, precocious transitioned to a caller model that backers accidental would chopped its vigor depletion by much than 99%.

"This inefficiency of the strategy is not a flaw but a feature," Bindseil and Schaff said. "It is 1 of the peculiarities to warrant the integrity of the wholly decentralised system."

It's not the archetypal clip the ECB has raised doubts astir integer currencies. ECB President Christine Lagarde successful May said she thinks cryptocurrencies are "worth nothing." Her comments came connected the backmost of a abstracted ungraded for the manufacture — the multibillion-dollar implosion of alleged stablecoin terraUSD.

- CNBC's Arjun Kharpal contributed to this report