Can the head of the European Central Bank (ECB), Christine Lagardeto “raise the gauntlet” to the challenge addressed last week by the Republican candidate for President of the USA Donald Trumpagainst the central bankers, whom he accused in court of being “labourers”, but from what it seems, a fierce confrontation is taking place underground between the two sides with the object of the crypto-currency market.

Public statements and rebuttals are only the tip of the iceberg. OR Christine Lagarde responded to the criticism of the billionaire presidential candidate, inviting him to Frankfurt in order to see for himself how difficult the role of the central banker is. “I have thousands of hard-working people, economists, lawyers, IT technicians, and I can assure you that they all work hard every day, not just once a month,” Ms Lagarde said.

Two of these employees, senior executives of the ECB, (the Ulrich Binzeil and Jürgen Schaff) in their study of the Bitcoin (The distributional consequences of Bitcoin) presented today by APE-MPE conclude that the use of cryptocurrencies – in addition to the other problems it has caused – has widened social inequalities.

But before reaching this conclusion, the authors of the study link the further course of Bitcoin with the outcome of the American elections. As they point out in their speeches “Trump does not explain what services of Bitcoin to society would justify its current and future ever-higher valuation, even though he compares it to previous innovations for which this was rather clear.” And they conclude that:

“Overall, the industry of crypto they perceive that Trump is the most favorable candidate for them. Although the crypto industry has recently shown more willingness to work with the Kamala Harris campaign, hoping for a more positive political direction, analysts predict a significant difference between the two political outcomes. They predict very different developments in the price of Bitcoin depending on who wins the US presidential election: if Trump wins, Bitcoin could rise to $80-90 thousand – but if Harris wins the presidential race the price could to drop to 30-40 thousand dollars. By this logic, after all, the price of Bitcoin fell as investors reacted to the 9/11 presidential debate between Harris and Trump, when the market judged that Harris won the debate – even though the issue of Bitcoin was not discussed at all.”

Regarding the subject of the study, namely the social dimension of Bitcoin, the two executives report that most economists argue that Bitcoin is a speculative bubble that will burst at some point and then have accumulated significant social costs. Bitcoin supporters deny this and are betting that its value will continue to rise, considering Bitcoin to be a great investment asset.

The study finds that even if the Bitcoin bubble doesn’t burst all the wealth effects early adopters enjoy through rising prices will be at the expense of non-owners, who are impoverished. Therefore, the redistributive effects of Bitcoin and the associated social damage far outweigh the effects of good or bad timing of investors’ buying and selling.

Despite the turn of the Bitcoin community, which emphasizes less and less the role of Bitcoin as a means of payment, but mainly as an investment vehicle, the authors of the study estimate that Bitcoin does not change the productive potential of the economy. However, they believe that investing in it cannot be considered a zero-sum game. In absolute terms, its early adopters increase their real wealth and consumption at the expense of the real wealth and consumption of those who do not own Bitcoin or who only invest in it at a later stage. Thus, the distribution of real wealth has shifted from Latecomers to Early Birds and will remain as a legacy of the original inequality.

These redistributive effects can be important in a long-term scenario characterized by the continuous appreciation of Bitcoin. As they feature in the study, “the new Lamborghinis, Rolexes, villas and stock portfolios of early Bitcoin investors do not come from an increase in the productive potential of the economy – but rather, they are financed by the reduction in consumption and wealth of those who do not initially own Bitcoin . It’s like filling one bucket by emptying water from another – the latecomers must be given up in favor of the early adopters. This redistribution of wealth and purchasing power is unlikely to occur without detrimental consequences for society. Even if Latecomers cannot make up for their loss of purchasing power, they will feel a sense of frustration, which will further contribute to an increasingly divided society.

Bitcoin’s price evolution, they find, apparently undermines the original idea of ​​Bitcoin’s independence from public policies and government interference. In a democratic context, where politicians are accountable to voters, this reliance implies that attitudes toward Bitcoin could influence electoral outcomes. The ongoing US presidential election campaigns demonstrate the intense efforts of some candidates to win over crypto-investing voters.

“Early investors have a vested interest in promoting Bitcoin values ​​to redistribute wealth and consumption from late investors to themselves, perhaps unaware of the redistributive nature of their vision. In any case, those who haven’t dealt with it should realize that they have compelling reasons to oppose Bitcoin and support legislation against it, with the goal of preventing Bitcoin prices from rising or seeing Bitcoin disappear altogether. Latecomers and non-holders and their political representatives should emphasize that the idea of ​​Bitcoin as an investment is based on redistribution against them. Failure to do so could skew electoral outcomes in favor of politicians who support pro-Bitcoin policies, implying a redistribution of wealth and fueling societal division,” the study concludes.