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 huge sums since the beginning of May.
On May 9, when the total value of these cryptocurrencies exceeded $ 20 billion, investors began selling them en masse without any real explanation. The price of two cryptocurrencies, Terra and Luna, is falling sharply. After this fall, other investors are panicking and selling as well. It’s crashed! On May 9, a Luna is still worth 60 euros. Three days later it is worth nothing, barely 1 øre.
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Anthony then lost 30,000 euros. “This corresponds to an annual salary. I saw my capital drop by 99% while I was blocked. I could not dispose of my fundshe explains. I do not blame myself for having invested, because it is part of the risk, I thought of the project. Where I, on the other hand, blame myself is not to have taken a portion of my profits when my capital was at its highest.“
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The young man also blames himself for having reinvested 10,000 euros from his pocket in the middle of a storm. The luna is then worth $ 15 and he is betting on an increase in it, which will never happen. “I did it out of sheer greed.“, He apologizes afterwards. At three in the morning I place 10,000 euros. When I wake up, they are worth just under 1,500.”
Anthony thinks he can win those 30,000 euros back, but investors are sending desperate messages on social networks. Talks about suicide prevention have even been shared on specialized forums. One man we spoke to, who prefers to remain anonymous, lost over 200 000 euros. He is now indebted. All his savings went up in smoke.
The most powerful cryptocurrency, but also the most well-known, Bitcoin, weighs more than 500 billion euros in the markets. With the sinking of Terra and Luna, she fell 15%. Bitcoin has lost more than half of its value in the last six months. Speaking: the war in Ukraine, and the Fed, the US Federal Reserve, which raised interest rates. This makes it more expensive to borrow.
This forces investors to take less risk and therefore move away from cryptocurrencies. The global capitalization of cryptocurrencies has thus been more than halved.
Cryptos like Bitcoin were created with a political goal, namely to no longer be dependent on states and central banks. In some way,”to be self-employedExplains Nathalie Janson, Professor of Finance, Specialist in Cryptocurrencies at Neoma Business School. Today it has been adopted by the traditional financial system“, she adds. Ultimately, central bank decisions also affect the value of cryptocurrencies.”They are also increasingly following the Nasdaq curve“, the US Index of Large Technology Companies.
Mathieu Jamar runs DCY, a crypto asset management company: “It was very nice not to have so much coherence. And there it is really very important“, He regrets. It is therefore not comfortable because it reflects an inert crypto market. Unfortunately, it depends on the whims of the economy. There is some doubt as to what initially interested me in crypto. It was to be at the forefront, and not to be on something quite ordinary, assimilated today.”
Cryptocurrencies are no longer just reserved for IT specialists. According to a survey conducted by KPMG, 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%) are young men under the age of 35.
Should these Frenchmen be worried about seeing the collapse of certain cryptocurrencies? For Romain Saguy, from Coinhouse, a bank that offers investments in this sector, if there is a decline in value, it is “normal“because the market is”cyclical“and”had experienced previous crises, such as in 2018. “
For him, the market will consolidate over the next five to ten years around a few cryptocurrencies, such as Bitcoin, the market leader, and Ethereum, another currency that is close. “It’s normal and it’s healthy. It should be noted that the market for cryptocurrencies is very new. Bitcoin is 12 years old, Ethereum dates from 2015-2016. Currently you have two strong cryptocurrencies. All the other projects should be seen a bit as start-ups. Maybe you want tomorrow’s Google and Facebook. However, the sorting will take place between the viable projects and those that are not.”
“It is likely that a large number of cryptocurrencies will disappear because we are still in an immature market that is looking for itself.Romain Saguy, Coinhouse
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Romain Saguy urges investors to limit risks by placing the majority 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 repeats regularly.
So far, the fall of Terra and Luna has not brought the major stock markets down, as in 2008 during the subprime financial crisis. However, there is a caveat to Nathalie Janson: “It remains a smaller market relative to its circulation. Nevertheless, there have been analyzes that tend to show that we have a larger connection today. The fact that the crypto market is gaining momentum raises this question. The risk. for a cascade effect is starting to grow. It is no coincidence that the regulators will intervene. ”
The European Commission and Parliament are working on a directive and regulation to regulate cryptocurrencies. It is particularly based on the Pacte Act, which was adopted in France three years ago. This requires crypto-asset managers to register with the Autorité des marchés financiers.
The aim is also to limit the use of cryptocurrencies for money laundering and terrorist financing. As these are not tracked 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 next to the dollar in September 2021. Since then, the state has bought bitcoins and resold some of them to fund various projects. The city of Miami has launched its own cryptocurrency. It lost 95% of its value in eight months.