With a capitalization of $ 3 trillion and over 200 million followers, it has become difficult to ignore the cryptocurrency market. Still suffering from a lack of legitimacy and acceptability in its form of trading currency, also criticized for its energy-intensive mining, its transformation into securities gives it a role of diversification and safe haven.
Launched in the wake of the 2008 financial crisis, the cryptocurrency crossed the threshold of US $ 3 trillion in capitalization on Monday. This universe of nearly 13,800 virtual currencies and 429 exchange platforms according to CoinMarketCap, however, remains largely concentrated around Bitcoin, which claims 42% of the capitalization, then, far behind, Ethereum, with a weight of 19 %.
And the fluctuation of digital currency prices has not lost its erratic pattern. As an example, Bitcoin tickled US $ 66,000 on Monday. Over one year, its price fell from a low of US $ 14,865 to a high of US $ 66,930, a gap of 4.5 times. In fact, it started the year around US $ 29,000 to hit US $ 64,000 and drop below US $ 30,000 in July and has rebounded since. Agence France-Presse (AFP), for its part, pointed to the Shiba Inu, a cryptoactive created to compete with the Dogecoin, itself based on a joke, which had reached at the end of October a theoretical size of 40 billion dollars, becoming the tenth largest cryptocurrency. But in a matter of days, nearly $ 10 billion evaporated. Rather volatile than all that!
It appears that the current outbreak of fever reflects a shift in funds seeking protection against inflation and assets uncorrelated to the traditional market. If since 2018, after a decade riddled with corrections, crashes and frauds, the monetary landscape has learned to coexist with the presence of these digital currencies, the pandemic has given cryptocurrencies an “anti-system” or “safe haven” dimension for a long time. vested in gold.
Mentalities evolution
The evolution of the mentality of regulators now accepting the idea of cohabitation is also part of the explanation. Last October, America’s first bitcoin-linked exchange-traded fund (ETF) debuted on Wall Street. This ETF relies on bitcoin-linked futures contracts. The indirect aspect of this placement was fundamental in the eyes of the US market regulator, the Securities and Exchange Commission (SEC), which has regularly warned about the significant volatility of bitcoin, AFP said.
For its part, the Canadian market saw its first Bitcoin-based ETF (BTC) appear last February. This ETF invests directly in physically settled bitcoin, not derivatives. Purpose Bitcoin closed at $ 12.20 on Monday, with price hovering between a low of $ 5.32 and a high of $ 12.57 since listing.
So far, the SEC has systematically rejected all registration applications submitted to it since the first, in 2013, AFP recalled. She denounced the use of currencies like bitcoin for illicit purchases or fraud and the risks to financial markets posed by their price volatility and the proliferation of unregulated exchange platforms.
For their part, central banks, which are working on the development of their own digital currency, frown at the proliferation of “stablecoins” backed by a currency or an asset and at the proliferation of decentralized platforms. They are also worried about the growing influence of technological giants in the financial system, which challenges the traditional banking model and financial intermediation.
Volatility and derivatives
If cryptocurrencies and crypto-assets remain speculative assets, the volatility of their prices thus allows the creation of derivatives giving virtual currency a form of transferable security traded on structured and regulated platforms. We have also seen the birth of futures contracts on the Chicago Stock Exchange. First on Bitcoin, then on Ethereum. The Stock Exchange has even gone so far as to introduce mini-contracts representing 10% of bitcoin in order to broaden access to this market, increase its liquidity and reduce the required margins, reinforcing speculation that tends to be self-sustaining.
Supporters of ETF entry see it as a further step in recognizing digital currencies as an asset, or even a qualifying investment traded on an exchange, which can only increase access and broaden the participation in this market.