After a very nice upturn during the health crisis, the cryptocurrency sector has been collapsing again for a few weeks. Bitcoin has tumbled around 70% from its all-time high reached last November. On Thursday, it was even approaching the symbolic floor of $20,000, its lowest level for more than a year and a half. Ether, binance coin and solana also fell drastically. In addition to the exception Binance, the largest cryptocurrency platform in terms of trading volume according to the specialized site Coinmarketcap, which announced the recruitment of 2,000 people, the recent fall in prices has forced most of the major crypto companies to separate. of some of their staff.
On Tuesday, the Coinbase platform announced that it intended to cut 18% of its workforce, or nearly 1,100 positions. Other crypto-currency companies such as Gemini, BlockFi or Crypto.com also plan to lay off 5 to 20% of their employees. High-profile start-ups, such as Terraform Labs, have literally imploded. On Sunday, the experimental crypto bank Celsius even abruptly halted its withdrawals. “This is where we are, in a phase of contraction that is settling into a period of stasis – what our industry calls the crypto winter,” Tyler and Cameron Winklevoss, CEO and Chairman of Gemini, respectively, wrote in early June. blog post. “All of this has been aggravated by the current macroeconomic and geopolitical turmoil,” the twins point out, referring to the war in Ukraine and soaring inflation.
“There is an increasingly strong correlation between cryptocurrencies and traditional markets. But today, the latter, because of inflation and the rise in key rates, such as those of the Fed, or even the war in Ukraine, fundamentally lack visibility”, explained recently to The Express Xavier Fenaux, partner at Interactiv Trading, little surprised by market variations. “In these difficult times, investors therefore tend to recover money, cash, in their riskiest assets. What cryptocurrencies are. And since this market remains very small, it is subject to more strong jolts in the event of movement”.
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Stablecoins, not so stable anymore
The fall of the Terra ecosystem tokens has particularly worried professionals in the sector. From around $65, the price of Terra-Luna, whose capitalization was around $40 billion at the beginning of May, lost almost all of its value in a few days, dragging down the TerraUSD ( UST), its stablecoin (stable currency), cryptocurrency whose value is not supposed to fluctuate against a reference currency like the dollar. However, stablecoins play a vital role in the stability of the crypto market by offering traders a safe place to put their money between bets on more volatile cryptocurrencies.
A few days after the fall of TerraUSD, it was the turn of Tether, the largest stablecoin in the world, to fail to maintain its link with the American dollar by falling as low as 95.11 cents in European exchanges. If the price then recovered, this rare slippage contributed to the fall of bitcoin. These failures have thus highlighted the fragility of a system based on speculation, with sometimes obscure contours. In 2019, the US Federal Reserve had already criticized in a report the “lack of transparency regarding the risk and liquidity of the assets guaranteeing stable currencies”.
Asked by the FinancialTimesPaolo Ardoino, chief technology officer at Tether, pledged to defend the token’s peg to the dollar, explaining that the company had bought “a ton” of American public debt that it was ready to sell for this purpose. . The British daily stresses, however, that he “refused to give details of his reserve of 40 billion dollars of American government bonds”, supposed to protect him from a new fall, not wanting to reveal the “secret sauce”. of the company. “Our counterparties are not public. We are not a public company, so we keep this information to ourselves, but we work with many large institutions in the traditional financial space”, defended the representative of Tether .
Expert criticism intensifies
It remains to be seen whether these companies will be able to regain the confidence of investors. Bitcoin had already fallen into limbo in 2018 (where its price had lost nearly 80%, from $20,000 to just under $4,000), before rising again during the health crisis. In any case, this new fall has given food for thought to the many researchers and IT professionals who do not hide their aversion to this blockchain-based technology, as the Washington Post points out.
In a letter recently sent to the United States Senate, 1,500 computer scientists, computer engineers and technologists specializing in the sector, thus alerted to “the catastrophes and externalities linked to blockchain technologies and investments in crypto-assets” arguing that they are “the inevitable results of a technology that is not meant to be used and will forever remain unsuitable as the foundation of large-scale economic activity”.
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“Any computer scientist should be able to see that crypto-currencies are totally dysfunctional payment systems, and that “blockchain technology” is a technological fraud” also launched in early May Jorge Stolfi, professor of computer science at the University of State of Campinas in Brazil, in a tweet that has gone viral. Several experts have followed suit, pointing to the catastrophic environmental impact of technology or the fact that it has made it possible to create a new form of deregulated finance. Arrested on TwitterGuido van Rossum, the founder of Python (one of the most widely used programming languages in the world) didn’t mince words, believing that we should just “let Web3 [nouvelle version d’internet basée sur la blockchain et la cryptomonnaie, NDLR] perish in a ball of fire”.
The chronicle of Aurélien Saussay