[Chronique de Gérard Bérubé] Crypto-crash

Their defenders would like to remember that they were born in the wake of the financial crisis in 2008. They saw in them an asset without correlation to the traditional market and assigned it both the role of safe haven and diversification. The 60% collapse of the cryptocurrency market since November removes them for all these supposed properties. This does not prevent these virtual currencies, which are criticized for their energy-intensive mining, from still suffering from a lack of legitimacy and acceptance in their kind of currency. And to be the target of all the warnings.

At the height of their popularity in November, cryptocurrencies constituted a market with a capitalization of more than 3 trillion US dollars and count more than 200 million followers. This universe housed nearly 13,800 virtual currencies and 429 exchange platforms, according to CoinMarketCap, a market that, however, remained concentrated around bitcoin, which then retained 42% of the capitalization, followed far behind by ethereum with a weight of 19%.

Today, global capitalization has reached 1,200 billion, or 60% or 1,800 billion less than six months ago. There are just over 10,000 cryptocurrencies and 309 trading platforms.

For number of followers quoted by The Canadian press, this bitcoin crash of $ 29,710 – a 25% year-over-year decline, but a 56% drop from its high of $ 66,930 – represents an appropriate time to enter the market. It also provides an opportunity to clean up the market, to separate the wheat from the chaff and to reveal the values ​​that may deserve the title of “first quality”. It also offers the opportunity to consolidate the industry around the most established companies.

But for others, the collapse in the wake of ” stablecoins “, Backed by a trusted currency or a real asset, caused a real shock wave. They no longer rule out the possibility that cryptocurrency may get stuck in a fundamental bear market (“ bear market ”) Extends over a year or two.

Long list of risks

And for regulators, once again, the opportunity is offered to reconsider the risks that these assets pose. This week, the warning came from New York State Attorney Letitia James. Subject to extreme and unpredictable price fluctuations, cryptocurrencies are among the most risky investments on the market. Several of these risks were realized in the past month, shaking both new and more established currencies, she said.

The list is long. It includes volatility and the risk of potential loss from hacking, fraud and theft. We are talking about very speculative value. Easy to create, the underlying value is too often subjective, not related to reality (except ” stablecoins but still, she adds), subject to the influence of social media platforms. These assets suffer from a lack of liquidity and can be difficult to sell. They like the absence of guarantees to find a recipient and the absence of mechanisms to stop trading in times of high stress, such as can be found on regulated trading platforms.

Adding to the list is sometimes high transaction costs, with some trading platforms requiring fees on transactions such as money transfers and withdrawals, which can vary depending on the size of the transaction and the size of the amount traded. The prosecutor also mentions the hidden costs due to the value of the cryptocurrency or cryptocurrency being amplified or inflated during the game of programmed automatic transactions (or botsEnglish).

She also talks about stablecoins quite unstable. Despite their name, there is no guarantee that this type of virtual currency provides protection against impairment. The nature and quality of the underlying asset can vary widely.

Not to mention the potential conflicts of interest, several platform operators that hold crypto use their platform for personal gain without supervision. “Recent reports also indicate that large investors have received preferential treatment, such as out-of-market payments,” she added.

Finally, the monitoring of this market is very limited as there is no regulated trading venue such as the New York Stock Exchange or the Nasdaq. The platforms are operated here and there on the planet, many of which are not available for any kind of monitoring and regulatory control. In case of fraud or embezzlement, the victim too often finds himself with little or no means of redress. And several crypto-issuers are unregulated, thus evading any audit and capital requirements.

A long list, it was said, emerges from ” bear market “in” bear market The last for cryptocurrencies dates back to 2018.

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