Cryptocurrency: how long?!

A temporary correction of the speculative bubble, heralded as the “crypto winter”, the reversal of cryptocurrencies that began at the end of 2021 continues. And we are still struggling to see the light at the end of the tunnel at the beginning of 2023.

Crash after boom. Known for their volatility, cryptocurrencies have not disappointed for over 12 months now. We initially believed in a “crypto winter,” a cold moment in the by then overheated cryptocurrencies. However, the episode, which was initially announced as temporary, turns out to be long-term. A “crypto winter” that briefly turned into an ice age.

Between the end of 2021 and the state of the market in January 2023, a world collapsed. At that time, prices were at their highest. The first descent, quite gradually, took place from November 2021 to January 2022. After recovering until April, the price suddenly fell. A particularly brutal collapse occurred in three phases: April, May and June.

During this period, cryptocurrencies, on average, lost more than half of their value. The benchmark bitcoin saw its value fall by more than 73% between November 2021 and the end of December 2022. month And the long-awaited rebound is long overdue. To the point where some wonder if it will ever happen. This is what is now being called the “crypto crash”. An unprecedented event accompanied by the sudden disappearance of platforms specializing in the purchase and sale of these securities; Behemoths like Celsius, Three Arrows Capital or even FTX have caused a lot of ink to flow.

Crypto Winter: End of Eras?

Until this recent, particularly brutal and prolonged crash, digital assets, led by Bitcoin, had experienced fortunes several times in the past. Therefore, the current phenomenon, which is thought to be similar to the previous ones, was first christened the “crypto winter” characterized by several months of price corrections… only to become stronger and higher.

The first such episode occurred in February 2011, when virtual currencies were just emerging. Bitcoin, born in 2009, rose from $1.06 to $0.67 in a matter of days. A drop of almost 40% has led the most pessimistic to declare this virtual currency dead. But a month later, Bitcoin flirted with $30… Falling back to $2.14 in November of that year. Still, we predicted his near end. No.

By the end of 2013, the value of Bitcoin exceeded $1,200. But in January 2015, a new crypto winter appeared. The lowest price was $180. We were talking about speculative bubbles then. It wasn’t until 2018, when, for the first time, another Bitcoin crash really caused excitement that the term “crypto winter” came into play. The previous year, bitcoin had risen from $900 to $20,000 in a matter of months. For the first time, it is enough to encourage the general public to rush to this “magic money”.

Unfortunately, in February 2018, its price dropped by 65%. Bitcoin is becoming a crowd pleaser. By the end of that year, the digital asset market as a whole had lost 80% of its value compared to the end of 2017. Goodbye dreams of retiring on an island paradise at the age of 30. Those who had spent all their fortunes in the hope of finding a real martingale had nothing but tears in their eyes.

And then everything went back to normal. And with the rise of Web3 and the metaverse, prices have risen again. The general public once again firmly believed it. It’s now or never. Until the new turn at the end of 2021. Since then, an unprecedented phase has passed. From June 2022 to early 2023, the market was unusually sluggish, except for a small drop last November due to the bankruptcy of FTX.

The existential crisis of cryptocurrencies

While the Decentralized Internet was the focus of the entire planet, the fall in the price of virtual currencies, Bitcoin and Ether, brought the promise of a new world to an abrupt halt. A virtual, shared world where Gafam no longer has all the power, but where each individual regains control of their data… and can develop value through their avatars and dematerialized wallet.

“We are at an existential crossroads for the industry. »

Yesha Yadav

Professor of Law

Crash of cryptocurrencies; A metaverse that struggles to be tangible and reliable despite the tens of billions invested by Mark Zuckerberg’s Metaverse; the near-endless investments of big brands to build digital empires on virtual domains bought at exorbitant prices; and even the arrest of FTX boss Sam Bankman-Fried in the Bahamas on suspicion of massive fraud… Plenty of reasons to question everything. “We’re at an existing crossroads for the industry”Yesha Yadav, a law professor specializing in cryptocurrency regulation, analyzed in his column. Washington post. He added that the market is currently being determined “What is the extent of the current gangrene”.

2023: the year of consolidation?

The bankruptcy of cryptocurrency trading giants, FTX and its sulphurous boss, calls for caution. This is proof that the famous phrase “Too big to fail” is not always true. There is still no stability in the digital asset industry. The market needs to be cleaned up and consolidated so that things gain some credibility in the eyes of the general public and financial investors. More transparency is also needed.

Therefore, it is quite possible to equip these platforms with tools (credit scoring, insurance, etc.) for monitoring the sector, as in the traditional financial industry, in order to avoid the recurrence of unexpected bankruptcies in the future. At the same time, other platforms are hunted … and cleaned. So, and Coinbase have announced that they will lay off 20% of their employees. Most players are scrutinized to assess the seriousness of their lack of liquidity.

However, given the current global economic situation, “We expect the current situation to continue at least through the first half of 2023.”John Avery, head of strategy and products for cryptocurrency, Web3 and capital markets at the American financial services company FIS, explained.

So the decline is probably not over. But the potential is still there. The price of the top 100 cryptocurrencies is still up an average of 2000% compared to 2016. Above all, blockchain technology and everything that comes from it remains more revolutionary than ever. The value this can create in the coming years is very real. According to analysts, the rebound could finally happen in late 2023 or early 2024. Therefore, the ice age is far from over. Digital assets are still well and truly in turmoil. More than ever, “patience is the mother of all virtues” for active crypto holders.

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