Cryptocurrencies are falling, the good days of 2021 are behind us

Bitcoin-led cryptocurrencies continued to fall on Monday in a risk-averse market, destabilizing the still-young sector, which in recent years has benefited from easy money created by central banks. The price of bitcoin, which soared in late 2020 and reached a record $ 68,992 in 2021, returned to less than $ 24,000 18 months ago on Monday, down 66%.

Coingecko estimates that the entire market has lost two-thirds of its value since its peak and is now worth just $ 1,000 billion. Crypto assets are “the first victims of risk aversion among investors worried about the spiral of inflation” in the world, – says Suzanne Streeter, an analyst at Hargreaves Lansdown. Stock markets around the world fell on Monday, burdened by data released before the weekend, about the galloping US inflation, which is putting pressure on the economy and forcing the Federal Reserve (Fed) to raise rates.

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Respectability is in doubt

Even more than other markets, cryptocurrencies have benefited from the generosity of central banks, which have filled investors with liquidity since the start of the Covid-19 pandemic to save the economy from collapse. In late 2020 and early 2021, bitcoin reached historic highs immediately after the US government sent checks to all taxpayers, suggesting that some took the opportunity to put their money into cryptocurrency.

Crypto assets have also benefited from the interest of institutional investors and large technology groups, such as Tesla boss Elon Musk, who has put a small portion of his group’s cash into bitcoin. Some of these investors believed that the sector had become more respectable and that its latest fall, when bitcoin fell from almost $ 20,000 to just over $ 3,000 from late 2017 to late 2018, could not be repeated.

Although central banks and regulators have repeatedly warned against instability and lack of regulation of cryptocurrencies, analysts at JPMorgan have supported the theory of some bitcoin proponents who see the first cryptocurrency as a digital gold form. Because the issuance of bitcoins is regulated by an algorithm, not regulated by the central bank, the asset is protected from the policy of issuing currency to support the economy and could theoretically protect against inflation, they explained.

For some skeptical analysts in the falling sector in recent months, bitcoin is proving that “bitcoin is not an anti-inflationary stock, but a risky asset and not a good one,” said Neil Wilson, an analyst at Markets.com.

Failed projects

Falling markets destabilize cryptocurrency projects or companies that have promised to build decentralized finance (or DeFi). After the collapse of the terraincoin terra, the cryptocurrency, which was supposed to be pegged to the dollar but fell in May, Celsius’s failures worried investors on Monday.

The company, which presents itself as a “platform of interest and loans”, offers investors to deposit their “historic” cryptocurrencies, such as bitcoin and ether, and pay them in exchange for profits much higher than those offered in the traditional market through loans or investment in new cryptocurrency projects. He has attracted interest in traditional finance, for example by increasing his capital with the Caisse depot et placement du Qu├ębec (CDPQ).

But the value of assets held at Celsius has fallen, with the fund claiming to manage $ 12 billion in mid-May, half as much as at the end of 2021. “Due to extreme market conditions, we are suspending all withdrawals and transfers between accounts,” the platform announced on Monday. “There is a breakdown in the crypto space, and it is likely to get worse,” warns Neil Wilson.

Proponents of cryptocurrencies, who have sometimes survived “cryptozyme,” as they call the troubled years after 2017, say they keep their stomachs strong. Changpen Zhao, head of Binance’s largest cryptocurrency buying platform, told an industry conference that “failures [de certaines entreprises] were part of the system “, adding that it was set to” grow and hire “as a competitor of Coinbase announced the suspension of hiring.

(from AFP)