should you invest in cryptocurrencies?

These new digital currencies, completely dematerialized, have established themselves in ten years as the main innovation in the world of finance. Indexed or not indexed to the dollar, they are issued by companies or groups of private users, unlike traditional currencies, the domain is reserved for governments. Cryptocurrencies have appeared in thousands of new applications: in video games, on trading sites or in services. Thanks to them, it is now possible to buy and sell goods (real or digital) or even borrow capital without going to banks. This new type of financial asset is connected to the new Internet revolution underway: Web3.

New Eldorado…

“We are for the first time giving physical existence to digital objects, making them unique through technologies such as blockchain, the computer protocol that allows these cryptocurrencies to be created, explains Raphael Bloch, founding journalist of TheBigWhale, an independent media outlet specializing in the sector. We are just starting to talk about metaverses or NFTs, but in two or three years everyone will be using them, sometimes without even knowing it. We are still just at the beginning of many new applications. » An opportunity to make a good (financial) bet on the future?

The explosion during the health crisis in the price of the most famous of these, Bitcoin and Ethereum, was indeed able to offer double-digit (or even triple-digit) returns. A market that in November 2021 was almost $3,000 billion in market capitalization. The equivalent of the entire CAC 40 or a giant Apple at its highest level. That’s enough to attract more than 8% of French people who said they have a “crypto” in their portfolio, while 30% plan to buy them, according to a study by auditing firm KPMG published in February. The new Eldorado for profit-seeking investors?

Is it a financial bubble?

Unfortunately, many of these currencies (and there are 19,000 of them!) have been gaining momentum since May. Bitcoin, the first cryptocurrency to account for 50% of the market, has since hit a high of $69,000 in November 2021 and has since fallen by more than 66%. “We are in a period of market stabilization, Analysis of Raphael Bloch. With inflation returning and key rates rising, big investors are abandoning tech stocks and cryptocurrencies to focus on financing government debt, which is once again profitable and safer. The huge influx of liquidity over the past two years has led to an increase in the number of cryptocurrencies and projects that use them. Of course, all these projects are not strong enough, it is a bit like the dotcom bubble of the 2000s. Therefore, the natural attitude would be to postpone any future projects.

” Not necessarily, Kleman Vardzala from the financial site Cryptoast promotes. From an investment perspective, it is during difficult times like this that opportunities are created. Today, however, the decline may well last for months or even years. » Therefore, caution is required. “As with any investment, risk awareness, education and awareness remain the most important elements. But to position yourself in this market today, even if you know how it works, is to be sure that you will not lose your understanding of a whole part of the world of tomorrow. »

The argument for some, even with the guarantees, seems insufficient. Since the current use of cryptocurrencies is largely speculative, even if in some countries with galloping inflation, such as Argentina, the indexation of these currencies to the dollar makes them a safe haven, albeit a very risky one. “You’d better go to the casino, at least we’ll have a good time!” piece by economist Michel Santi, a member of the Finance Watch association. Crypto is a bit like trading for the poor, people who want to play without being able to get into the stock market or invest in real estate. Cryptocurrency is not based on any underlying instrument: at least there is a company behind the actions. »

Crypto, not green

Another serious obstacle to investment is the environmental argument. To “release” (or “drill”) these assets use the processing power of computers running at full capacity. Named operation work confirmation (proof of work), extremely energy-intensive and partly responsible for the global shortage of modern semiconductors. A sign of the awareness of players in this new economy is that Ethereum, the second cryptocurrency in the sector, has just announced that next August they will switch to a much less energy-intensive way of creation: proof of stake (share confirmation). Is there enough evidence?

“No, a piece by Michelle Santi. We need to wait until all this is much better regulated, as some players are still accepting very questionable financial flows. On the other hand, blockchain is a revolutionary technology. It enables transactions to be tracked and secured and will change our lives, particularly with the advent of the digital euro, a cashless currency that will replace our euros tomorrow and enable central banks to respond much more effectively to financial challenges. crisis.. » With or without risk, keeping an eye on these cryptocurrencies seems to be the consensus position. “Make no mistake, warns Raphael Bloch, all these projects using crypto are the Google of tomorrow. And Bitcoin, now 13 years old, is a mature technology. It is here to last. »

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