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Even savings banks now want to offer accounts for crypto money. But investors have already lost a lot of money with Bitcoin and Co. What future do risky virtual currencies have?
When German banks are asked about transactions with cryptocurrencies, they have a hard time. On the whole, bankers consider Bitcoin, Etherium & Co. to be nonsense if private individuals invest. However, many bankers do not want to risk their business relationships with young people who are asking for cryptocurrencies.
“We would like to offer solutions to customers who want to invest in these highly speculative investment products of their own accord so that we don’t close ourselves off to market needs,” says Steffen Steudel from the Federal Association of Volks- und Raiffeisenbanken on request. Others are more radical: “We don’t want to lend our good name to cryptocurrencies,” says Thomas Rienecker from the German Savings Banks Association.
“Highly speculative form of investment”
Nevertheless, savings banks and also Volksbanks want to set up accounts in which private customers can store cryptocurrencies. At the end of the year, DZ-Bank also wants to offer crypto trading technology for local Volksbanks and Raiffeisenbanks. The savings banks are more cautious: “When it comes to trade, skepticism still prevails,” says savings bank spokesman Rienecker.
Steffen Steudel from the Volksbanken Group does not exude any real enthusiasm either: “Customers must of course be aware of the risks of the investment.” They would be enlightened, introduced to the trade and can try it out on a small scale first. Steudel repeatedly mentions the “highly speculative form of investment that you should approach with a cool head”.
Incredible profits – real losses
People who invest money cryptically and are therefore interested in the system are particularly fond of cryptocurrencies. Also, some early “gamblers” and traders report fabulous profits. A lawsuit against suspected fraudsters who are said to have exploited the Bitcoin enthusiasm is underway before the Münster Regional Court. 60,000 people in Germany alone gave their money to “OneCoin” believing in virtual investments. The damage is estimated at 320 million euros. The main perpetrator is on the run.
Many have paid dearly. Two years ago, Elon Musk’s Tesla group bought bitcoins for $1.5 billion. It sounded like a new era in money and payment transactions. Tesla also had its electric cars paid for with bitcoins. The crypto business with end customers ended after just a few weeks and the joy of investing billions did not last long. Last year’s Tesla balance sheet left only $184 million in bitcoins – the rest was quietly sold at a loss and written off.
How bitcoins are created
Bitcoins are produced through complex calculations in high-performance computers and must be certified. Since the amount of fresh bitcoins is limited, only the “bitcoin mines” with the fastest computers get a chance. The rest are stuck with enormous electricity costs and high depreciation. Because of the energy consumption and the large amount of waste heat from the computer systems, cryptocurrencies are considered harmful to the climate.
Initially, bitcoins were advertised as a social payment method: people in developing countries should manage their virtual crypto accounts with a smartphone. In this way, they could participate in cashless payment transactions. In fact, bitcoins prevailed so that workers from Nigeria, for example, could send money home cheaply. But there, many people thought of bitcoins as an easy money-making machine: they borrowed real money, bought bitcoins, and bet on higher prices for their bitcoins. Rows and rows of unsuspecting people were ruined.
Extreme fluctuations
The price of Bitcoin is characterized by extreme swings. Except for a peak in 2017, little happened for years. At the end of 2020, Bitcoin took off and – with a sharp drop – reached a value of 56,000 euros after a year. Today, virtual money is only worth half as much.
Also because of the strong fluctuations, cryptocurrencies are not suitable for normal payment transactions, warns Bundesbank board member Burkhard Balz. Anyone who pays with crypto can hardly estimate what it costs in real money. Anyone who has money to get has to speculate whether it will really be a worthwhile business.
Cryptocurrencies also do not fulfill other functions of money: They are neither a reliable store of value, nor can you count on them, according to business journalist Alexander Hagelüken, who has written a book on the subject. Several successful acts by criminals show that Bitcoin & Co. are not protected from hackers and fraudsters.
Artificial money has one advantage: it cannot be controlled. Neither banks nor central banks nor official clearing houses are aware of the transactions. Therefore, cryptocurrencies are used by criminals, terrorists and corrupt regimes, as the consulting firm Chainalysis continuously documents.
The new gold?
The “Frankfurt School of Finance and Management” emerged from the venerable “Bank Academy”, in which the financial sector had its junior staff trained. This is where Germany’s biggest advocate of cryptocurrencies is based. Professor Philipp Sander says that those who are skeptical about Bitcoins and the technology behind them usually don’t understand the whole thing: “Expertise illuminates”.
Sander compared cryptocurrencies to gold. Ulrich Bindseil and Jürgen Schaaf from the European Central Bank have contradicted this: While there has been stable demand for gold for centuries, the world could easily do without cryptocurrencies overnight.
“Of course, the earnings potential of cryptocurrencies is significantly higher,” says Claudio Wewel, currency expert at the Swiss bank Sarasin Hessian radio. “But that comes at an unusually high risk.” He thinks: Compared to all other investment opportunities, cryptocurrencies would “still hold up remarkably well”. This indicates that Bitcoin & Co could be overvalued, so their current value is threatened.