Anthony, a young web developer based in Montpellier, is one of those French people who have invested heavily in cryptocurrencies, these digital currencies used on the internet. Like many others, he has lost huge amounts of money since the beginning of May.
On May 9, when the total value of these cryptocurrencies exceeded 20 billion dollars, investors began to sell them en masse, without any real explanation. The price of two cryptocurrencies, Terra and Luna, are falling sharply. Seeing this fall, other investors panic, and sell too. It’s the crash! On May 9, a Luna is still worth 60 euros. Three days later, it is worth nothing, barely 1 cent.
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Anthony then lost 30,000 euros. “This represents one year’s salary. I saw my capital drop by 99% while being blocked. I could not dispose of my fundshe explains. I don’t blame myself for having invested because that’s part of the risk, I believed in the project. Where I blame myself, on the other hand, is not having taken part 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 midst of a storm. The Luna is then worth 15 dollars, and he is betting on a rise in it, which will never happen. “I did this out of pure greed.“, he regrets a posteriori. At three o’clock in the morning, I place 10,000 euros. When I wake up, they’re barely worth 1,500.”
Anthony thinks he can win back these 30,000 euros but investors are sending desperate messages on social networks. Anti-suicide prevention numbers have even been shared on specialized forums. A man we spoke to, who prefers to remain anonymous, lost over 200 000 euros. He is now over-indebted. All his savings went up in smoke.
The most powerful cryptocurrency, but also the best known, Bitcoin, weighs more than 500 billion euros on the markets. With the sinking of Terra and Luna, she plunged 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 to move away from cryptocurrencies. The global capitalization of cryptos has thus been more than halved.
Cryptos like Bitcoin were created with a political objective, that of no longer depending on states and central banks. Somehow, “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“, she adds. Eventually, the decisions of central banks also affect the value of cryptos.”They are also increasingly following the curve of the Nasdaq“, the American index of major technology companies.
Mathieu Jamar runs DCY, a crypto-asset management company: “It was very nice not to have so much correlation. And there, it is really very important“, he regrets. It is therefore not pleasant because it reflects an inert crypto market. Unfortunately, it depends on the vagaries of the economy. There is some questioning of what initially interested me in cryptos. It was being on the cutting edge, and not being on something quite common, assimilated today.”
Cryptocurrencies are no longer reserved for IT specialists only. According to a study by KPMG, carried out 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 French people be worried about seeing the collapse of certain cryptocurrencies? For Romain Saguy, of Coinhouse, a bank that offers investments in this sector, if there is a drop in value, it is “normal“because the market is”cyclic” and “had experienced previous crises, such as in 2018.”
For him, the market will consolidate in the next five to ten years around a few cryptos, such as Bitcoin, the market leader, and Ethereum, another currency that is close behind. “It’s normal and it’s healthy. It should be noted that the crypto-asset market is very recent. Bitcoin is 12 years old, Ethereum dates from 2015-2016. Currently, you have two strong cryptos. All the other projects should be seen a bit like start-ups. Maybe inside you will have the Googles and Facebooks of tomorrow. However, the sorting will be done between the viable projects and those which are not.”
“It is likely that a large number of cryptocurrencies will disappear because we are still in an immature market which is looking for itself.Romain Saguy, Coinhouse
Romain Saguy calls on 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.
For now, the fall of Terra and Luna has not brought down the major stock markets, as in 2008 during the subprime financial crisis. It is however a warning, for Nathalie Janson: “It remains a lesser market in terms of its circulation. Nevertheless, there have been analyzes which tend to show that we have a greater connection today. The fact that the crypto market is gaining momentum poses this question. The risk of a cascading effect is starting to grow. It is no coincidence that regulators want to intervene.”
The European Commission and Parliament are working on a directive and a regulation to regulate cryptocurrencies. It is based in particular on the Pacte law, passed in France three years ago. It requires crypto asset managers to register with the Autorité des marchés financiers.
The objective is also to limit the use of cryptocurrencies for money laundering and the financing of terrorism. Since these are not traced 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, alongside 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 the space of eight months.