Bitcoin at its lowest point, market collapsing, layoffs at industry start-ups, the state of El Salvador in the red… The whole sphere of “cryptos” is suffering a real crash.
“Last week my loss was more than 800 euros, I don’t dare look there anymore…”, Wael, 20, half amused, half worried. Last year, he invested in the UOS cryptocurrency, made by the company Ultra and backed by video game giant Ubisoft. This delivery man from the Paris region does not hide it: he started with a profit, hoping to “easily make money”, but with a certain amount. He didn’t put all his savings, only a nest egg of 1,200 euros, on the idea of ”boarding the crypto train before he left”. However, it has now lost most of its stake, caught in the whirlwind of a crypto asset value collapse, like many investors. Last November, bitcoin peaked at nearly $69,000. Today it is worth less than 20,000. A -70% free fall for the queen of cryptocurrencies. And the correction is even more severe for thousands of other cryptos, some of which have gone out of business.
In recent years, the appreciation of bitcoin, driven by selfish speculators, has led those interested in the subject to have a kind of absolute faith in cryptography, as if the technology were the (liberal) answer to many financial problems. Except that the collapse of the entire industry, twice as fast as the Nasdaq, has cast doubt on the Technology Stock Exchange in the midst of a period of inflation, beliefs and certainties. For the economist Marc Touati, chairman of the ACDEFI cabinet, mass is said:
“We have just witnessed the bursting of the crypto bubble. Unfortunately, as with other speculative bubbles, most small investors arrived just before the collapse, and they are the ones who will lose the most.”
But that didn’t deter those who put their money into lines of computer code. Like Clément Vannier, 23, just graduated, who noted a correction “between 5,000 and 6,000 euros” on his investments in bitcoin and Ethereum. Nevertheless, this fine crypto expert puts it into perspective: “Don’t panic. I believed strongly in these technologies, and I still do. It’s a very unstable and unstable environment, and as long as we haven’t sold, we haven’t lost. »
However, there are a few rare smaller airlines that are more overwhelmed. As Daniel, a young Englishman, shares his dismay on YouTube: “Everyone said bitcoin would easily exceed $100,000, so even if I bought it for $50,000, I was confident. I invested $7,000 in bitcoins, and today it’s worth half that… I’m sorry I believed everyone who said it was easy to become a millionaire with cryptos. “.
Source (https://www.nouvelobs.com/economie/20220630.OBS60336/les-fauches-crypto-currencies-i’m-pissed-to-have-believe-those-who-said-it-was-easy-to become a millionaire.html)
The El Salvador case
The pill is even harder for people in El Salvador to swallow. Spurred on by its young president, Nayib Bukele, the country has made bitcoin its official currency, with a dual ambition. First, to free ourselves from the US dollar, which replaced the local currency twenty years ago, while proposing to save bank commissions on money transfers from Salvadorans working abroad (funds that weigh heavily on nearly a quarter of GDP).
But beyond this momentum, Bukele has also decided to convert more than $105 million of the country’s monetary reserve into bitcoins. Amount that has since lost more than half of its value and amounts to $48 million. Not to mention that the entire legal tender implementation cost about $425 million. But Bukele continues to believe in it, Twitter reports.
Except his economic bet is of serious concern. JPMorgan Bank and the International Monetary Fund (IMF) have warned that El Salvador is “on an unsustainable path”, with very large financing needs and exploding government debt. So much so that the Fitch Ratings agency downgraded the country’s rating and insurance contracts covering a potential default saw their levels rise by more than 300%.
G20 Watchdog Proposes First Global Cryptocurrency Rules In October
The Financial Stability Board (FSB) said Monday it would propose “robust” global rules for cryptocurrencies in October, following recent market turmoil that emphasized the need to regulate the “speculative” sector.
The FSB, a body made up of regulators, treasury officials and central bankers from the Group of 20 Economies (G20), has so far limited itself to overseeing the cryptocurrency industry and says it poses no systemic risk.
But recent turmoil in crypto markets has highlighted their volatility, structural vulnerabilities and growing ties to the wider financial system, the FSB said.
“The failure of a market participant, in addition to imposing potentially large losses on investors and threatening market confidence due to the crystallization of behavioral risk, can also quickly transfer risk to other parts of the market. the FSB said in a statement.
The value of bitcoin, the largest cryptocurrency, is down about 70% from its all-time high of $69,000 in November and traded at $20,422 Monday, causing many investors losses.
The TerraUSD stablecoin crashed earlier this year, and withdrawals and transfers from major cryptocurrency firms Celsius Network and Voyager Digital rocked the markets.
Stablecoins must be subject to robust regulation if used as a means of payment, according to the FSB.
The FSB has no legislative power, but its members commit to applying its regulatory principles in their own jurisdictions. The watchdog is lagging behind the European Union, a key FSB member, which has agreed comprehensive new rules for the cryptocurrency market this month. The FSB said cryptocurrencies are primarily used for “speculative purposes”, but do not operate in a “regulation-free space” and must comply with relevant existing rules. Many countries require cryptocurrency companies to have anti-money laundering checks.o
Source: © Zonebourse
with Reuters 2022
Edition number: 448