Cryptocurrency: fad or bet on the future?

Cryptocurrency: fad or bet on the future?


(Photo credits: Pixabay – madartzgraphics)

Democratized between 2008 and 2009 with the arrival of Bitcoin, cryptocurrency is attracting more and more investors. But if the industry is constantly evolving, households remain wary: a study conducted by Ipsos last February shows that only 8% of French people currently hold cryptocurrency assets, while 30% of them are thinking about it. place money.

If at present, there are more than 13,000 cryptocurrencies valued between 1500 and 3000 billion dollars, Bitcoin and Ethereum together represent more than two thirds of the market size.

So when on May 12, the two suffered a devaluation of more than 50% of their value, the entire cryptocurrency market suffered the consequences.

Cryptocurrency: a very volatile currency

Although insiders brace each year for an asset write-down at this time of year, no one saw the intensity of the early May crash coming. Overnight, bitcoin, which had set its record high at $67,000 in November 2021, lost more than 50% of its value, struggling to reach $30,000 today.

If the concept did not seem clear to you until today, cryptocurrency is a (virtual) digital currency that allows, just like a conventional currency, to buy goods and services, or even to speculate.

The particularity of cryptocurrency and its difference from conventional currencies lies in the fact that its activity does not depend on any intermediary and that transactions are secured on a blockchain.

So, when we talk about cryptocurrency, we are talking about a very volatile currency. So, to overcome this volatility, a new type of cryptocurrency emerged between 2013 and 2014: stablecoins.

The objective of the stablecoin is to reduce the volatility of traditional cryptocurrencies by attaching them to fiat currencies such as the Euro, the Dollar or the Yen. The goal is clearly to keep the advantages of a traditional cryptocurrency, while keeping the stability of a classic currency…

And yet. The crash of last May will have terrible consequences on the cryptocurrency market. In addition to the spectacular falls of Bitcoin and Ethereum, we have witnessed the disappearance of the stablecoin Terra USD and its sister currency Luna, which nevertheless appeared at the beginning of the year in the ranking of the most promising cryptocurrencies, and with the most large caps. Going from a price of 120 dollars to less than 1 dollar, it probably did not survive the last crash.

As Alireza GORZIN, President of BFG CAPITAL, reminds us, “cryptocurrency remains a market that is still hidden, parallel, and relatively unknown. Cryptic in a nutshell. And if we must consider more than 13,000 different cryptocurrencies to date, we must not forget that the international currencies, of which it is not always easy to appreciate the outlines and the evolutions, and of which the oldest is the Pound Sterling (GBR), are only 180 in number… Consequently, we cannot carry any form of conviction on this subject to date.

Between Cryptos, Metaverse, StableCoins, Blockchain, Dark Pool, Market Cap and hundreds of other subjects to master, we at BFG CAPITAL believe that it is more prudent to be an observer of the phenomenon at first. Then, possibly to integrate it once the market matures, and this, even if it means letting go of the big potential gains from the start, rather than taking absolutely unknown risks. »

Read also: Bitcoin: it’s time for the legal and tax update!

Cryptocurrency and Earnings: The Love of Risk

Faced with such an uncertain economic and political context, the cryptocurrency market is culminating in instability. It had been well over two years since Bitcoin lost this much value. From this observation, there are two schools among investors: those who are particularly hampered by the situation and are looking to sell, because they are afraid of losing more assets, and those who do not let themselves be discouraged and see here a opportunity to invest at lower cost. A bargain before a possible price increase.

No matter which school you choose, as of this writing Bitcoin’s price, which is indicative of the health of the market, is still below the $30,000 mark, when it peaked at 68,000. dollars in early April 2022.

Although known for their volatility, cryptocurrencies continue to attract investors. It must be said that the market has many advantages. The absence of intermediaries like banks during transactions not only makes them faster, but it also brings greater accessibility and a multitude of choices on investment platforms. If we add to this the possibilities of high returns, and secure transactions thanks to the blockchain infrastructure, the cryptocurrency market remains very attractive despite the high level of risk that results from it.

What should be remembered is that any investment in cryptocurrency, including in stablecoin, but also of any other type, involves a risk of capital loss. To limit the risks, it is necessary to have a broad knowledge of financial culture, and to be accompanied by professionals. Our Capital Managers are therefore at your disposal to advise you in all your investment procedures.

Written on June 15, 2022 by Amélie Yem, Business Development Manager and Edwin Fabre at BFG Capital

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