|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cryptocurrency News Articles
Bitcoin Posed Significant Risks to Society, Even in a Scenario Where Prices Continue to Rise: ECB Economists
Oct 23, 2024 at 10:17 pm
Two economists from the European Central Bank (ECB), Ulrich Bindseil and Jürgen Schaaf, have issued a critical analysis of Bitcoin, warning that even in a scenario where Bitcoin prices continue to rise, the cryptocurrency poses significant risks to society.
Two economists from the European Central Bank (ECB) have issued a critical analysis of Bitcoin, warning that even in a scenario where Bitcoin prices continue to rise, the cryptocurrency poses significant risks to society. The economists, in a paper titled ‘The Distributional Consequences of Bitcoin’, argue that Bitcoin’s wealth redistribution effects, which benefit early adopters, come at the direct expense of latecomers and non-holders, leading to social and economic inequality.
According to Bindseil and Schaaf, the rapid rise in Bitcoin prices enriches early adopers but impoverishes those who enter the market later or do not invest at all. They describe this as a “zero-sum game,” where the wealth and consumption increases of early Bitcoin investors are funded by the diminishing consumption and financial losses of non-holders.
Early adopters vs late comers
The economists emphasize that this redistribution is a serious societal concern, as it leads to frustration and malaise among those left behind, potentially deepening societal divisions. They conclude that Bitcoin’s wealth effects are not linked to an increase in the economy’s production potential, and that the rising prices of the cryptocurrency have no benefit to the broader economy.
“In absolute terms, early adopters exactly increase their real wealth and consumption at the expense of the real wealth and consumption of those who do not hold Bitcoin or who invest in it only at a later stage.
“At some stage, the Bitcoin holdings are equally spread amongst the two subsets of the population we assume in section 4 (or have largely converged to this state), such that subsequent valuation increases of Bitcoin will be neutral (and have no effects at all on relative consumption, and none on total consumption unless consumption crowds out investments and therefore undermines growth),” the economists wrote.
Political implications and election influence
Bindseil and Schaaf also raise concerns about Bitcoin’s influence on politics, noting that the growing number of crypto investors could sway election outcomes. They point to the ongoing U.S. presidential elections, where some candidates are actively courting crypto voters to secure their support. The economists argue that pro-Bitcoin political campaigns may further exacerbate wealth redistribution, as early adopers have a vested interest in promoting policies that maintain or increase Bitcoin prices.
What you should know
Bindseil and Schaaf’s paper comes as a stark reminder that Bitcoin, often touted as a revolutionary financial innovation, may have far-reaching consequences that extend beyond individual investment returns. In this respect, those who got in at relatively low prices and/or sold at high prices have made high profits and those who bought and held bitcoins at low prices and did not sell them have high imputed profits.
Disclaimer:info@kdj.com
The information provided is not trading advice. kdj.com does not assume any responsibility for any investments made based on the information provided in this article. Cryptocurrencies are highly volatile and it is highly recommended that you invest with caution after thorough research!
If you believe that the content used on this website infringes your copyright, please contact us immediately (info@kdj.com) and we will delete it promptly.
-
- Bitcoin (BTC) Price Prediction: BTC Enters Key Support Region as US Elections Near
- Oct 24, 2024 at 02:25 am
- Bitcoin price declined on Wednesday, going down by 2.3 percent at the time of writing to trade at $65,812. The crypto bellwether has been on a descending trajectory in the last two sessions following its rejection near the psychological $70k mark on Monday.
-
- Chainlink and Swift Will Introduce a New Blockchain Integration, Simplifying Digital Asset Settlement for Financial Institutions Using Existing Infrastructure
- Oct 24, 2024 at 02:20 am
- Decentralized Oracle provider Chainlink will introduce a new blockchain payment solution for financial institutions.