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Even savings banks now want to offer cryptocurrency accounts. But investors have lost a lot of money on Bitcoin and Co. What’s the future for risky virtual currencies?
When German banks are asked about cryptocurrency transactions, they have a hard time answering. In general, bankers think Bitcoin, Ethereum, etc. are nonsense if privately invested. However, many bankers don’t want to risk a business relationship with young people demanding cryptocurrencies.
“We would like to offer solutions to clients who want to voluntarily invest in these highly speculative investment products, so that we are not turning a blind eye to market demand,” asked Steffen Steudel of the Federal Association of People’s Banks. Others are more radical: “We don’t want to lend our good name to cryptocurrencies,” said Thomas Rienecker of the Association of German Savings Banks.
“Highly speculative form of investment”
Nonetheless, Savings Bank and Volksbanks want to set up accounts where private customers can store cryptocurrencies. At the end of the year, DZ-Bank also hopes to provide cryptocurrency trading technology to local Volksbanks and Raiffeisenbanks. Savings banks are more cautious: “When it comes to trade, skepticism still prevails,” said Rienecker, a spokesman for the savings bank.
Steffen Steudel of the Volksbanken Group doesn’t show any real enthusiasm either: “Clients must of course be aware of the risks of investing.” They will be inspired, introduced to the industry and can try it out on a small scale first. Steudel repeatedly refers to “a highly speculative form of investment that you should treat with dispassion.”
Incredible profits – real losses
Cryptocurrencies are especially liked by people who invest in crypto and are therefore interested in the system. Additionally, some early “gamblers” and traders reported spectacular profits. Fraudsters who allegedly took advantage of Bitcoin enthusiasm are being prosecuted at the Regional Court of Münster. In Germany alone 60,000 people donated their money to “OneCoin”, which believes in virtual investments. The damage is estimated at 320 million euros. The principal criminal is at large.
Many paid a heavy price. Two years ago, Elon Musk’s Tesla Group purchased bitcoin for $1.5 billion. This sounds like a new era of currency and payment transactions. Tesla has also paid for its electric cars in bitcoin. The euphoria of investing billions of dollars didn’t last long as the crypto business with the end client ended after only a few weeks. Only $184 million in bitcoin remained on Tesla’s balance sheet last year — the rest were quietly sold at a loss and written off.
How Bitcoin was born
Bitcoins are generated through complex calculations in high-performance computers and must be certified. Due to the limited amount of fresh bitcoins, only the “bitcoin mines” with the fastest computers have a chance. The rest suffer from huge electricity costs and high depreciation rates. Cryptocurrencies are considered harmful to the climate due to the energy consumption and large amounts of waste heat from computer systems.
Initially, Bitcoin was pitched as a social payment method: people in developing countries should use their smartphones to manage their virtual crypto accounts. In this way, they can participate in cashless payment transactions. In fact, Bitcoin prevails so workers from Nigeria can send money home cheaply. But there, many people see bitcoin as a simple money-making machine: They borrow real money, buy bitcoin, and bet that their bitcoin will be worth more. Rows of unsuspecting people were devastated.
violent fluctuations
Bitcoin prices are characterized by wild volatility. Aside from peaking in 2017, little has happened over the years. At the end of 2020, Bitcoin took off and reached a value of 56,000 euros a year later after a sharp decline. Today, virtual currencies are worth half of that.
Bundesbank board member Burkhard Balz also warned that cryptocurrencies are not suitable for normal payment transactions due to their high volatility. Anyone paying with cryptocurrencies has a hard time estimating the cost of paying with real money. Anyone with money to make has to speculate whether this is actually a worthwhile business.
Nor do cryptocurrencies fulfill the other functions of money: they are neither reliable stores of value nor can they be relied upon, according to business journalist Alexander Hagelüken, who has written a book on the subject. Book. Some successes by criminals show that Bitcoin & Co. is not protected from hackers and fraudsters.
Artificial money has an advantage: it cannot be controlled. None of the banks, central banks, or official clearing houses are aware of these transactions. As a result, cryptocurrencies are used by criminals, terrorists, and corrupt regimes, as consulting firm Chainalysis continually documents.
new gold?
The “Frankfurt School of Finance and Management” derives from the long-established “Banking Academy”, where junior employees in the financial sector were trained. This is where Germany’s biggest cryptocurrency advocates are based. Prof Philipp Sandner says those who are skeptical of Bitcoin and the technology behind it often don’t understand the whole thing: “Expertise shines a light”.
Sandner compared cryptocurrencies to gold. Ulrich Bindseil and Jürgen Schaaf of the European Central Bank counter this: While demand for gold has been steady for centuries, the world could easily go without cryptocurrencies overnight.
“Of course, the earning potential of cryptocurrencies is much higher,” said Claudio Wewel, currency expert at Swiss bank Sarasin. Hesse Radio. “But that brings with it an unusually high level of risk.” He argues that cryptocurrencies “still perform very well” compared to all other investment opportunities. This suggests that Bitcoin & Co may be overvalued and therefore its current value is threatened.