Anthony, a young web developer based in Montpellier, is one of the French people who has invested heavily in cryptocurrencies, these digital currencies used on the internet. Like many others, he has lost significant amounts since the beginning of May.
On May 9, when the total value of these cryptocurrencies exceeded 20 billion dollars, investors began selling them in bulk, without any real explanation. The price of two cryptocurrencies, Terra and Luna, has fallen sharply. Seeing this fall, other investors were bewildered, and selling as well. It’s the collapse! On May 9, a Luna still costs 60 euros. Three days later, it was worthless, about 1 cent.
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Anthony lost 30,000 euros. “It represents a year’s salary. I saw my capital drop 99% while blocking. I can’t dispose of my fundshe explains. I don’t blame myself for having invested because that’s part of the risk, I believe in the project. Where I blame myself, on the other hand, is not taking a share of my profits when my capital is at its highest.“
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The young man also blames himself for reinvesting 10,000 euros from his pocket in the midst of a storm. Luna is worth 15 dollars, and he’s betting on increasing it, which will never happen. “I did it out of pure greed.“, He regrets a posterior. At three in the morning, I put in 10,000 euros. When I woke up, they were almost 1,500.”
Anthony thinks he can return this 30,000 euros but investors are sending desperate messages on social networks. Suicide prevention figures have even been shared in expert forums. One man we spoke to, who preferred to remain anonymous, lost more than 200 000 euros. He is now too much in debt. All his savings went up.
The most powerful cryptocurrency, but also the best known, Bitcoin, weighs more than 500 billion euros in the markets. With Terra and Luna sinking, he dropped 15%. Bitcoin has lost more than half of its value in the past six months. In question: the war in Ukraine, and the Fed, the American central bank, which raised its interest rates. Thus, borrowing becomes more expensive.
This pushes investors to take less risk and therefore stay away from cryptocurrencies. The global capitalization of cryptos is more than half.
Cryptos like Bitcoin were created with a political purpose, no longer relying on states and central banks. Howsoever,”to be independent“, explains Nathalie Janson, professor of finance, specialist in cryptocurrencies at Neoma Business School. Today it has been adopted by the traditional financial system“, he added. Eventually, the decisions of central banks also affect the value of cryptos.”They are also increasingly following the Nasdaq curve“, the American index of major technology companies.
Mathieu Jamar runs DCY, a crypto-asset management company: “Very good without much interaction. And there, it’s really very important“, he regrets. This is therefore not conducive as it reflects a stagnant crypto market. Unfortunately, this depends on the vagaries of the economy. There was some questioning what first interested me in cryptos. It has to be on the cutting edge, and not on something quite common, assimilated today.”
Cryptocurrencies are no longer reserved for IT specialists only. According to a KPMG study, conducted by the Association for the Development of Digital Assets, 8% of French people have them in their pockets, and 16% of Americans. The majority (46%) were young men, under 35 years of age.
Should these French be worried to see the collapse of some cryptocurrencies? For Romain Saguy, of Coinhouse, a bank that offers investments in this sector, if there is a decrease in value, it is “normal“because the market is”around“at”has experienced past crises, such as in 2018. “
For him, the market will converge over the next five to ten years around a few cryptos, such as Bitcoin, the market leader, and Ethereum, another currency close behind. “This is normal and it is healthy. It should be noted that the crypto-asset market is very new. Bitcoin is 12 years old, Ethereum dates from 2015-2016. Currently, you have two strong cryptos. All other projects should look a bit like start-ups. Maybe inside you will have Google and Facebook tomorrow. However, classification will be made between viable projects and those that are not.”
“It is likely that a large number of cryptocurrencies will disappear because we are in an immature market that is finding itself.Romain Saguy, Coinhouse
Romain Saguy calls on investors to limit risks, by placing most of their cryptocurrency investments in Ethereum and Bitcoin, and by not investing more than 5 to 10% of their assets. “You should only invest the money you can afford to lose”he always repeats.
So far, the collapse of Terra and Luna has not brought down major stock markets, as it did in 2008 during the subprime financial crisis. However, this is a warning, for Nathalie Janson: “It remains a lower market in terms of its circulation. However, there are reviews that likely show that we have a bigger connection now. The fact that the crypto market is gaining momentum raises this question. risk of a cascading effect is starting to grow. It’s no coincidence that regulators want to intervene. ”
The European Commission and Parliament are making a directive and a regulation to regulate cryptocurrencies. This is specifically based on the law of the Pacte, which was passed in France three years ago. It requires crypto asset managers to register with the Autorité des marchés financiers.
The goal is also to limit the use of cryptocurrencies for money laundering and the financing of terrorism. Because they are not monitored by banks or central banks, their use is less controlled. It should also be noted that countries are very interested in cryptocurrencies. El Salvador made crypto a legal currency, along with the dollar, in September 2021. Since then, the state has bought bitcoins, and resold some of them to finance various projects. The city of Miami has launched its own cryptocurrency. It lost 95% of its value in eight months.