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Economists at the European Central Bank (ECB) believe that Bitcoin’s continued rise in value will drastically affect wealth distribution, but not in a good way for most people. In their paper, titled “The distributional consequences of Bitcoin,” the economists claim that early Bitcoin adopters will be the primary beneficiaries, while latecomers and non-holders will face the brunt of the consequences. It doesn’t matter if the so-called “Bitcoin bubble” bursts or not. Even without a price crash, this asset is pushing wealth in one direction — up, toward the early birds. Bitcoin, built as a revolutionary decentralized currency for peer-to-peer payments, is unfortunately treated as an investment, which works in favor of those who got in early. With no real economic value attached to it, Bitcoin’s surge is purely a result of collective belief and constant fresh investments. The ECB economists argue that even though the value could continue to rise, the benefits will not be distributed evenly. Instead, it will make economic inequalities worse, creating a divide between those who capitalized early and everyone else. Bitcoin’s changing role in the global economy The idea that Bitcoin would transform payment systems hasn’t materialized. Well except for illicit transactions, according to the ECB. Instead, Bitcoin’s value became based on the belief that its price will keep increasing. Economists at the ECB explain that the price rise is driven by new investments, and this has caused BTC to transition from a payment system to a speculative investment. It’s no longer about Nakamoto’s vision of using Bitcoin for everyday transactions. Now it’s all about making a quick profit. For retailers, institutions, and governments alike. According to the paper, this situation is incredibly problematic. Bitcoin doesn’t contribute to the production potential of the economy, and economists are skeptical of its long-term sustainability. Societies can sustain…

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Filed under: News - @ October 20, 2024 9:07 am