The new drop in the value of bitcoin, the emblem of the cryptocurrency market, continued on Thursday to drop below the threshold of US$26,000, its lowest level since the end of December 2020.
Posted at 6:00 a.m.
This value recovered a little to around US$28,000 late in the day, as bitcoin market participants were still trying to figure out the impact of the sudden difficulties in cryptocurrencies such as stablecoinssuch as the Terra USD, whose value is supposed to maintain parity with the US dollar.
Meanwhile, the value of bitcoin is down 30% over one month. It is also down 60% since its all-time high of US$67,700 reached last November.
As a result of this bitcoin relapse, the entire cryptocurrency market is down to just US$1.2 trillion, down from over US$3 trillion at its peak six months ago.
To try to see more clearly, The Press collected the observations and comments of two Quebec analysts of the cryptocurrency market.
They are Alexandre F. Roch, who is a professor of finance and a cryptocurrency analyst at UQAM’s School of Management Sciences (ESG), as well as Philippe Jetté, who is a senior cryptocurrency analyst for the Rivemont Crypto Fund at the firm Rivemont Investissements.
What conclusion can be drawn from this relapse of bitcoin and cryptocurrencies?
PHOTO PROVIDED BY ESG-UQAM
Alexandre F. Roch, finance professor and cryptocurrency analyst at ESG-UQAM
Alexandre F. Roch, finance professor and cryptocurrency analyst at ESG-UQAM
“It was thought for a long time that cryptocurrencies like bitcoin would have little correlation with the fluctuations of the financial markets in general. Some promoters of cryptocurrencies even claimed that they could be a hedge against inflation. However, this is much less the case, as we can see these days with the relapse of cryptocurrencies even more markedly than the current correction in the stock markets. As for inflation protection, the relapse in value attributed to cryptocurrencies turns out to be the complete opposite of a “safe haven”, with a loss in value much worse than the impact of inflation on value. [du pouvoir d’achat] of the US dollar. »
PHOTO PROVIDED BY RIVEMONT
Philippe Jetté, Senior Cryptocurrency Analyst for the Rivemont Crypto Fund at Rivemont Investissements
Philippe Jetté, senior cryptocurrency analyst for the Rivemont Crypto Fund at the firm Rivemont Investissements (words taken from his “Bulletin Crypto”)
“It’s a disaster in the cryptocurrency markets as bitcoin is down around 20% in May alone. The story remains the same as in recent months. The cryptocurrency market retains its strong correlation with North American stock indices, especially the index [de marché] technology-flavored NASDAQ. As this index bottoms out for the year, so does bitcoin. However, volatility is higher than ever these days. »
What lessons should those interested in bitcoins learn?
Alexandre F.Roch
“This other fall in cryptocurrencies reminds us that it remains a very speculative and very volatile market, depending on the opinions and perceptions of value without a real asset base that circulate among the participants in this market. Also, the cryptocurrency market remains very little supervised by the regulatory authorities of the financial markets. Therefore, for those who have cryptocurrency investments in their portfolio, an episode of falling value like what we are seeing these days should be a good time to re-evaluate the suitability of such high-risk investments in a portfolio. well diversified. »
Philippe Jette
“If any such setback can lead to [un sentiment de] panic, those who have been in the cryptocurrency world long enough know that these are often the times when the maximum opportunities are found. Need we remind you that this is far from the first time that bitcoin has suffered such a decline and that, each time, it was to better head towards new heights? This asset class [les cryptomonnaies] was the best performer of the last decade despite these many setbacks. It is the long-term vision that has enabled investors in this emerging market to generate unparalleled returns. »
What are the implications for financial regulators?
Alexandre F.Roch
“Cryptocurrencies and cryptocurrency-related investment products are increasingly accessible to investors and investment fund managers. On the other hand, the more people or funds invest in cryptocurrencies, the higher the level of systemic risk of cryptocurrencies in financial markets and the economy could become. Consequently, this other episode of the fall of cryptocurrencies should alert the authorities of the financial markets to the importance of better regulating cryptocurrencies in order to mitigate the future potential of systemic risk for the economy. »
Philippe Jette
“Whatever the conclusion of this crisis, it will represent a key moment in the effort to regulate cryptocurrencies by the authorities. [financières]. Indeed, US Treasury Secretary Janet Yellen said in a public hearing [mardi] that while digital assets can “promote innovation”, they could also “present risks to the financial system”. Mme Yellen also indicated that cryptocurrencies like Terra UST [appelées stablecoins parce que liées au dollar US] were to be regulated by the end of the year. »