• Crypto debacle makes calls for stronger regulation louder
• Hardly anything positive to hear from the ECB about cryptocurrencies
• CoinShares analyst sees four major hurdles to bitcoin adoption
In an interview with BTC-ECHO, James Butterfill, Head of Research at Europe’s largest manager for digital assets, CoinShares, reveals what he thinks of the ECB’s harsh criticism of the crypto veteran Bitcoin and how things could continue for the oldest and largest cryptocurrency by market capitalization .
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Criticism of the ECB on Bitcoin
James Butterfill is hardly surprised by the authors’ statement in an article published by the European Central Bank last November that Bitcoin is “on the way to irrelevance”. In his opinion, one should “never expect anything particularly positive about cryptocurrencies” from the ECB. It can be compared to “as you would ask a stable boy 100 years ago if he thinks cars are a good idea.”
Nevertheless, he expected more understanding from the monetary authorities. The ECB has written that Bitcoin “has never been used to any significant extent for legal transactions in the real world”. Butterfill disagrees, because after all, Bitcoin is a whole new asset class. In addition, the central bank operates in a stable region of the world, while higher Bitcoin volumes can also be seen in regions with less stable financial systems. In addition, the CoinShares analyst considers the authors’ criticism that Bitcoin does not generate cash flow to be a weak argument. “After all, commodities like gold do not generate any cash flow, but they are still in demand,” Butterfill told BTC-ECHO.
Total Addressable Market model
According to Butterfill, to value bitcoin, CoinShares considered the Total Addressable Market (TAM) model, which, as the CoinShares website states, “explores bitcoin’s potential to compete with other global currencies over the long term.” The central question is which market Bitcoin could potentially take over and to what extent. “We see potential in gold, the M2 money supply, corporate bonds and the currency reserves of central banks,” says Butterfill. Depending on what percentage of the respective asset class flows into Bitcoin, the price of the cryptocurrency will also increase.
On the other hand, the stock-to-flow model, which Butterfill says was initially quite promising, does not actually deliver any added value on closer inspection, since it measures a variable with BTC supply growth that is already known.
The Biggest Obstacles to Bitcoin Adoption
When asked about the biggest obstacles to bitcoin adoption, Butterfill named four major hurdles to BTC-ECHO. The first and, in his opinion, most important obstacle is over-regulation. “While you can’t ban bitcoin, you can effectively prevent its proliferation with very strict regulation – and quite frankly, stricter regulation is even appropriate after the whole FTX thing,” says the CoinShares analyst. The second hurdle are protocol risks. Although Bitcoin has never been hacked, it is conceivable that someone will discover a software bug. There is also an adoption risk. So there is a risk that not enough people will adopt Bitcoin. “However, we don’t see that. The number of channels in the Lightning network is constantly increasing – just like that of BTC addresses,” Butterfill puts this risk into perspective. The fourth problem was the still large fluctuations in the Bitcoin price. “After all, people do not use a good as money whose volatility is as high as that of Bitcoin,” explains the CoinShares analyst. However, a decrease in the susceptibility to fluctuations can already be seen. According to Butterfill, BTC volatility has recently been “lower than ever”.
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