“I saw my capital drop by 99%”

Anthony, a young web developer from Montpellier, is one of those French people who has invested heavily in cryptocurrencies, those digital currencies used on the internet. Like many others, he has lost huge amounts of money since early May.

On May 9, when the total value of these cryptocurrencies exceeded $20 billion, investors started selling them en masse without any real explanation. The price of two cryptocurrencies, Terra and Luna, is plummeting. Seeing this drop, other investors panic and sell as well. It’s a crash! As of May 9, Luna still costs 60 euros. After three days it costs nothing, only 1 cent.

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Anthony then lost €30,000. “This corresponds to the annual salary. I saw my equity drop 99% during the lockdown. I couldn’t manage my fundshe explains. I don’t blame myself for investing, because that’s part of the risk, I believed in the project. On the other hand, I blame myself for not receiving a share of my profits when my capital was at its peak.

The young man also blames himself for reinvesting 10,000 euros from his own pocket at the height of the storm. Then Luna is worth $15 and he bets her up, which will never happen. “I did it out of pure greed.“, he regrets a posteriori. At three in the morning I bet 10,000 euros. When I wake up they are barely worth 1500.

Anthony thinks he can win back the €30,000, but investors are sending out desperate messages on social media. Suicide prevention figures have even been posted on dedicated forums. The person we spoke to, who wished to remain anonymous, lost more than 200 people. 000 euros. He is now over-indebted. All his savings went to waste.

The most powerful cryptocurrency, but also the most famous, bitcoin, weighs over 500 billion euros in the markets. With the flooding of Terra and the Moon, it fell by 15%. Bitcoin has lost over half its value in the last six months. Doubtful: The war in Ukraine and the Fed, the US central bank, which has raised its interest rates. Thus, credit becomes more expensive.

This encourages investors to take less risk and therefore to abandon cryptocurrencies. Thus, the global capitalization of crypto has more than halved.

The price of the moon collapsed completely in three days, from May 9 to 12.  (SCREENSHOT/COINMARKETCAP)

Cryptocurrencies like Bitcoin were created with the political goal of no longer being dependent on governments and central banks. Somehow, “to be independentexplains Natalie Janson, Professor of Finance and Cryptocurrency Specialist at Neoma Business School. Today it has been adopted by the traditional financial system.“, – she adds. After all, the decisions of central banks also affect the value of cryptocurrencies. “They are also increasingly following the Nasdaq curve.the US index of large technology companies.

Mathieu Jamard runs DCY, a crypto asset management company: “It was very nice that there was not so much correlation. And this is really very important“He regrets. Therefore, it is unpleasant, because it reflects the inert crypto market. Unfortunately, it depends on the vagaries of the economy. There are some doubts about what originally interested me in cryptography. It was at the forefront, not something completely ordinary assimilated today.

Cryptocurrencies are no longer just for IT professionals. According to a KPMG study by the Digital Asset Development Association, 8% of French people carry them in their pocket, while 16% of Americans. The majority (46%) are young men under the age of 35.

Should these French be worried about the collapse of some cryptocurrencies? For Romain Sagi of Coinhouse, a bank that offers investments in this sector, if there is a drop in value, it is “normalbecause there is a marketcyclical” and “survived previous crises, such as in 2018.”

In his opinion, in the next five to ten years, the market will consolidate around several cryptocurrencies, such as bitcoin, the market leader, and ethereum, another currency that is not far from it. “It’s okay and it’s great. It should be noted that the market for crypto assets has appeared quite recently. Bitcoin is 12 years old, Ethereum dates back to 2015-2016. You currently have two strong cryptocurrencies. All other projects should be considered as start-ups. Perhaps you will have the Google and Facebook of tomorrow within you. However, sorting will be done between viable projects and non-viable ones.

“It is likely that a large number of cryptocurrencies will disappear because we are still in an immature market that is looking for itself.

Romain Sagy, Coinhouse

on Franceinfo

Romain Sagy urges investors to limit risk by placing most of their cryptocurrency investments in Ethereum and Bitcoin and not investing more than 5-10% of their assets. “You should only invest money that you can afford to lose”he repeats regularly.

So far, the decline of Terra and Luna has not brought down major stock markets, as it did in 2008 during the subprime financial crisis. However, this is a warning for Natalie Janson: “It remains a smaller market in terms of its circulation. However, analyzes have been done that tend to show that we have a big connection today. The fact that the cryptocurrency market is gaining momentum raises this question. It’s no coincidence that regulators want to step in.”

The European Commission and Parliament are working on a directive and regulation to regulate cryptocurrencies. It is based, inter alia, on the pact law adopted in France three years ago. It requires crypto asset managers to register with the Autorité des Marchés financiers.

The goal is also to limit the use of cryptocurrencies for money laundering and terrorist financing. Since they are not tracked 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 cryptocurrency a legal currency along with the dollar in September 2021. Since then, the state has bought bitcoins and resold some of them to fund various projects. The city of Miami has launched its own cryptocurrency. It lost 95% of its value in eight months.