Cryptocurrencies: fashion or bet on the future?

(Photo credits: Pixabay – madartzgraphics)

Democratized between 2008 and 2009 with the arrival of Bitcoin, the cryptocurrency is attracting more and more investors. But if the sector is constantly evolving, families 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.

While there are currently more than 13,000 cryptocurrencies with a value of between $ 1500 and $ 3 trillion, Bitcoin and Ethereum together account for more than two-thirds of the market size.

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

Cryptocurrency: A very volatile currency

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

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

The peculiarity of cryptocurrency and its difference compared to 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 goal of the stablecoin is to reduce the volatility of traditional cryptocurrencies by linking them to fiat currencies such as the Euro, the Dollar or the Yen. The goal is clearly to maintain the advantages of a traditional cryptocurrency, while maintaining the stability of a classic currency …

It’s still. The collapse of last May will have dire 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 however appeared at the beginning of the year in the ranking of the most promising cryptocurrencies, and with the largest caps. Going from a price tag of $ 120 to less than $ 1, it probably didn’t survive the latest crash.

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

Between Cryptos, Metaverse, StableCoins, Blockchain, Dark Pool, Market Cap and hundreds of other topics to master, we at BFG CAPITAL believe it is more prudent to be an observer of the phenomenon at the beginning. Then, possibly to integrate it once the market is mature, and this, even if it means abandoning the potential big gains from the beginning, rather than taking absolutely unknown risks. ”

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

Cryptocurrencies and earnings: the love of risk

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

Regardless of which school you choose, at the time of writing the price of Bitcoin, which is indicative of the health of the market, is still below the $ 30,000 mark when it peaked at $ 68,000 in early April 2022.

While known for their volatility, cryptocurrencies continue to attract investors. It must be said that the market has many advantages. The absence of intermediaries such as banks during transactions not only makes them faster, but 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 comes with it.

What must be remembered is that any investment in cryptocurrencies, even in stablecoins, but also of any other type, carries a risk of capital loss. To limit 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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