A recent paper by the European Central Bank claims that early Bitcoin traders are benefiting at the expense of newer entrants into the market.
The paper argues, that Bitcoin’s limited and decentralized supply structure has created a situation where those who purchased the cryptocurrency at lower or earlier prices sell it at a profit to new buyers.
The authors propose that Bitcoin be either subjected to strict price controls or completely banned to prevent what they call an “unfair wealth transfer”.
Bitcoin Wealth Distribution Could Lead to Social Unrest
According to the article, the wealth distribution caused by Bitcoin could cause social unrest.
“Current Bitcoin non-holders need to realize that they have good reasons to oppose Bitcoin, and to advocate legislation to stop it from increasing in price or for Bitcoin to disappear completely.”
The ECB’s report raises concern about Bitcoin’s involvement in criminal activities, citing studies that have claimed it is frequently used in illegal transactions.
This view is, however, contested by the May 2024 report of the U.S. Treasury Department. It points out that fiat currencies like Bitcoin are still the most popular means of illicit activity.
The ECB’s paper is interesting in that it does not examine why Bitcoin has risen in value since its launch in 2009.
This ignores the fact Satoshi, the pseudonymous Bitcoin creator, created the asset as both a decentralized system of payment and a hedge against the devaluation of fiat currencies.
Bitcoin’s limited supply of 21 million coins has driven its price up, especially as governments have increased their money supply.
The ECB paper fails to address the context of monetary inflation.
The ECB’s position is criticized by critics who claim that the paper does not address the broader context surrounding monetary inflation.
In 2023-2024, the UK public sector debt reached nearly 98%, its highest level since 1960.
The national debt in the U.S. has risen to $35 trillion, due in part to a 41% rise in M2 money supply from 2020.
The contradictory claims of the paper–that Bitcoin has no intrinsic value but poses a threat to stability–ignore inflationary pressures, which Bitcoin was designed against.
Bitcoin continues to be a popular investment for both retail and institutional investors as traditional currencies continue to lose their purchasing power.
Retail and institutional investors are increasingly interested in Bitcoin and Bitcoin-related products.
Charles Schwab, a financial services giant, recently commissioned a survey that revealed U.S. investors’ growing interest in cryptocurrency ETFs.
The survey revealed that 45% of respondents intend to invest in cryptocurrency through ETFs within the next 12 months, a significant increase from the 38% who responded the year before.
Only U.S. stocks rank higher than crypto, with 55% of participants indicating plans to invest.
Investors in Millennial ETFs showed an even greater enthusiasm for crypto. 62% of them intend to allocate funds to this sector. This compares to 48% who plan to invest in U.S. stock, 47% in bonds, and 46% in real assets such as commodities.
