European Central Bank Claims Early Bitcoin Investors Exploit New Buyers

A recently published paper by the European Central Bank (ECB) claims that early Bitcoin investors are profiting at the expense of newer entrants to the market. The paper argues that Bitcoin’s decentralized and capped supply structure has created a system where those who bought the cryptocurrency at lower prices can sell for a profit, thereby exploiting newer buyers.

The ECB authors propose that Bitcoin should either be subjected to strict price controls or banned entirely to prevent what they describe as an "unfair" wealth transfer.

Bitcoin Wealth Distribution Could Spark Social Unrest

The ECB paper warns that Bitcoin’s wealth distribution could lead to social unrest, suggesting that non-holders have strong reasons to oppose the cryptocurrency and push for legislation to either cap Bitcoin prices or eliminate it entirely.

The report also highlights concerns over Bitcoin’s potential use in criminal activities, citing studies that suggest it is often involved in illegal transactions. However, this perspective contrasts with a May 2024 report from the U.S. Treasury Department, which noted that fiat currency remains the most common means for illicit activities, not cryptocurrencies like Bitcoin.

Interestingly, the ECB report does not discuss the factors behind Bitcoin’s value surge since its creation in 2009, nor does it acknowledge that Bitcoin’s pseudonymous creator, Satoshi Nakamoto, designed it both as a decentralized payment system and a hedge against the devaluation of fiat currencies.

ECB Paper Overlooks Monetary Inflation Context

Critics argue that the ECB’s paper fails to consider the broader context of monetary inflation. For example, the UK's public sector debt reached nearly 98% of GDP in 2023-2024, the highest level since the 1960s. Similarly, the U.S. national debt soared to $35 trillion, fueled in part by a 41% increase in the M2 money supply since 2020.

Despite claiming that Bitcoin lacks intrinsic value, the paper fails to address the inflationary pressures that Bitcoin was designed to mitigate. As traditional currencies lose purchasing power, Bitcoin’s role as a store of value continues to attract both retail and institutional investors.

Rising Interest in Bitcoin and Crypto ETFs

Meanwhile, interest in Bitcoin and Bitcoin-related products continues to grow. A survey by Charles Schwab revealed that U.S. investors are increasingly looking to invest in cryptocurrencies through exchange-traded funds (ETFs). The survey found that 45% of respondents plan to invest in crypto via ETFs in the next year, an increase from 38% in the previous year.

Millennial investors, in particular, showed stronger enthusiasm for crypto, with 62% planning to allocate funds to the sector, surpassing demand for U.S. stocks, bonds, and real assets like commodities.