The ECB Worried About Bitcoin and Possible Risks to Financial Stability

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The European Central Bank (ECB) is worried about Bitcoin and its possible negative effect to financial stability. Yves Mersch, member of the executive committee of the ECB, is following the cryptocurrency market cautiously. According to him, it can create a big problem for the global financial stability.

Is the Financial Stability at Risk?

In an interview with the German Newspaper Boersen Zeitung, Mersch has said that we are living in a speculative euphoria that could create concern around financial stability.

“When financial market infrastructure like stock exchanges start to operate in this business, there is an important risk for the financial stability,” commented Mersch.

As reported by Deutsche Bank, a Bitcoin Crash would create several consequences to the cryptocurrency market. According to the rank elaborated by this institution, a crash in the cryptocurrency world is more dangerous for the markets than the North Korean threat.

Some weeks ago, the Chicago Mercantile Exchange (CME) started to offer Bitcoin future to its investors. These institutions are allowing important institutions and big investors to place their money in the cryptocurrency market. More engagement from the financial world, means also more risk for the international financial markets.

Loans and Retirement Savings in Order to Trade Bitcoin

An important risk to the markets comes with an increasing number of individuals taking debt in order to buy cryptocurrencies. During 2017, Bitcoin and the cryptocurrency market in general has experienced an important increase. Several financial institutions and investors have decided to finally invest in different cryptocurrencies. This situation has created a price surge that may be dangerous for these investors that are taking debts.

Joseph Borg, in an interview with CNBC said:

“We have seen mortgages being taken out to buy Bitcoin… People do credit cards, equity lines. This is not something that a guy who’s making $100000 a year, who’s got a mortgage and two kids in college ought to be invested in.”

If there is a crash in the markets not all the individuals and investors would be able to resist it. The consequences would be terrible for the economy and could damage the whole financial ecosystem. Millennials are place their retirement savings in Bitcoin and other virtual currencies. If there is a crash, because of any reason, then, an important part of a young generation will grow without a retirement.

Other individuals are starting to pay fees in order to take their savings out from their retirement accounts. At CoinStaker we recommend to invest what you can afford to lose.

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