Is there a sheriff on Crypto Wild West?

Here’s a promotional video that actor Matt Damon – Jason Bourne’s nickname on screen to embody the action hero ” Memory in the skin »,« Death in the skin “, etc. – of course, I would like to remain silent. Only here it is, the price of cryptocurrencies in October 2021, the release date of this announcement entitled” Fortune promotes the brave[1] (“Luck smiles bravely”) and the intention to say all the good things he thought about Crypto.com is not quite the same. This is the least we can say after the collapse of cryptocurrency prices[2] caused hundreds of billions of dollars to evaporate.

Price collapse from 67,000 to 19,000 dollars

If six months ago the global cryptocurrency market weighed more than $ 3,000 billion, in mid-June it was worth only $ 1,000 billion. And this has decreased even more in recent days, especially under the influence of recent measures taken by central banks to curb galloping inflation.

The fall of these cryptocurrencies – and especially bitcoin, which fell from $ 67,000 in November 2021 to $ 19,000 in mid-June 2022 – is like Jason Bourne’s tricks: dizziness.

To estimate the amount of damage, the MarketWatch Twitter account concluded by going directly to the case:

If you bought $ 1,000 bitcoins during Matt Damon’s Fortune Favors the Brave music video, they cost about $ 481 today. [3]. »

If this message from May 13, 2022 was updated in mid-June, it would be enoughonly $ 250 … And some network users joke:Matt Damon was in Ocean 11, 12, 13. You cryptocurrency guys just fell victim to his latest robbery. ”

Financial bubble context

In his popular work, The economy of the common good “Jean Tyrol, Nobel Prize in Economics, recalls that” a bubble exists when the value of a financial asset exceeds the “fundamental” asset, ie the present value of the dividends, interest or rent it will bring today and in the future.[4]. “.

Compared to the macroeconomic context of recent years (easy money due to low or even zero interest rates) is a phenomenon that is largely supported quantitative easing central banks – low inflation, rising cost of technology companies …), it is easy, a posteriori, to see that all components of this sequence (access to credit, speculation, transactions) have been brought together. to form bubbles.

Crypto, a safe haven? The veil of illusion rises, the king is naked

In the case of cryptocurrencies, it will be enough for several macroeconomic indicators to go wrong so that the whole thing falters.

Here, the slowdown in the world economy, the uncertain economic situation, and inflationary pressures strongly opposed by central banks show that these cryptocurrencies are not safe havens that some praise.

To put it simply, we can say that the “king is naked.” Because the seven-month adjustments in the cryptocurrency market actually show that the foundations of these virtual assets are fragile, if not absent: what about their intrinsic value? What about their stability or their imaginary nature as a “stock of value”?

The market’s answers to these few questions are well known: the collapse of prices and the failure of several transactional platforms: Celsius, Babel Finance, TerrasUSD or even Coinbase, which recently announced the elimination of 18% of its workforce (about 1,100 posts).[5]…

Jean Tyrol’s Economics of the Common Good, published in 2016, has already made the following almost prophetic conclusion:

If one day the market decides that bitcoin has no value – if investors lose faith in bitcoin – bitcoin will have virtually no value, because bitcoins have no fundamental value, unlike stocks or real estate. »

Is there a sheriff on Crypto Wild West?

It is possible that this crisis of confidence, which affects cryptocurrencies, including the support of all digital currencies, will leave long traces. Perhaps not a frosty winter that would freeze all forms of development of these innovative technologies, but rather, and in any case in the short term, some cooling of the air …

In addition to this, the cryptocurrency crisis has shown that initial promises to be new reliable intermediaries that will free access from all institutional financial institutions (banks, central banks, even states) have fallen. more libertarian utopia than economic reality, The developers of these digital media will have to adapt to new forms of regulation designed to better regulate this Far West cryptocurrency.

In Europe, the draft resolution MiCA (Crypto Assets Market) is soon to harmonize the legal and regulatory context to provide the issuers of these digital assets with a basis for developing these new technologies. Obviously, trying to regulate to better protect and, above all, succeed in establishing what these digital assets are still sorely lacking: trust. Without it trust “, The structure of cryptocurrency, which has been an important part of all monetary history since the beginning of mankind, will continue to decline. The saying is well known:

Confidence is gained in drops, but lost in liters. »

It is high time to close this leak so that one day all these lost liters can be found.

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NOTES

1 https://youtu.be/9hBC5TVdYT8

2Crypto assets are virtual assets stored on electronic media, which allows the community of users who accept them as payment to make transactions without having to resort to legal tender.

3 https://twitter.com/MarketWatch/status/1524898004167274496

4 Jean Tyrol, The economy of the common goodPUF. (See Chapter 11, “Why Finance?”)

5 https://www.npr.org/2022/06/14/1105026558/coinbase-cryptocurrency-layoffs?t=1655718921410