Bitcoin: an unprecedented crisis in many ways, Cryptocurrencies

Half $20,000 gave way to bitcoin this weekend, dropping to $17,600. However, the most important piece of information is that it has fallen below its December 18, 2017 all-time high of $19,511, putting the best-known cryptocurrency into a period of unprecedented uncertainty despite rising above $21,000 today. “The ‘Hodlers’ mentality is really being tested, and those who haven’t given up yet may be more tempted than ever.”judge Craig Erlam, market analyst at Oanda.

In the bitcoin world, there is a category of rather special investors who practice “HODL”, they are called HODLers. Far from speculators looking for the slightest move in the market, they buy tokens, which they hold for as long as possible in the hope of – anyway – profit. The term comes from a deformation of the English term to conserve (Keep), this would have been first used in capital letters by an apparently drunk Internet user on a forum and “bad trader”in his own words.

The three year rule no longer applies

This principle could have remained in limbo on the network if the development of bitcoin had not been so stable, despite very strong fluctuations over the years. So much so that there is finally an unspoken rule that any investor who holds their tokens for at least three years ends up in capital gains. HODL has become almost a religion: it is the belief in the foundations of bitcoin and that it will continue to rise through the centuries.

No luck, the price was momentarily wrong in the three-year law. Not enough to question HODL dogma, but it’s a blow to its followers.

DeFi doesn’t help

According to some analysts, the price of bitcoin has become a victim – a pledge – of the crisis in decentralized finance (DeFi): “The crisis of confidence in DeFi is spreading because, ultimately, its structures are mostly unclear”, Judge Philippe de Gouville, CEO of Ismo. (Centralized) interest-bearing loan and savings platform Celsius has suspended withdrawals for more than a week, casting doubt on its solvency. The “Total Locked Value,” i.e., all amounts invested in DeFi, has fallen from $107 billion when it peaked on November 9, 2021 to $38 billion today.

Another protocol has caused panic in recent days: Solend, which found itself in a liquidity crisis, to the point that its administrators put it to a vote and succeeded in seizing the account from a “whale” (important investor). Yes, you understood correctly: it was about the arrest of his assets. The measure, however, was overturned by second vote after the outrage on social media. “I can’t stop thinking about animal farm George Orwell: “All animals are created equal, but some are greater than others”, says Jeffrey Halley, market analyst at Oanda. He laments that the DeFi ecosystem is less decentralized than he has shown as problems mount. “I don’t rule out a crypto rally this week as enough lambs seem to have been silenced”he nuances.

Several unknowns

But more worrying are other unknowns: “The reality is that we don’t have a history to appreciate bitcoin at the same time as high inflation, such a high dollar and a strong upside.”says independent analyst Letizia Bonaventure on Twitter.

Created in 2009, it crosses such a configuration for the first time. The tightening of the monetary policy of the US Federal Reserve recently led to a downturn in the markets as well as in cryptocurrencies, while bitcoin had to decouple from traditional assets, which makes many investors doubt their faith.

Technology is still evolving

Meanwhile, however, for the rest of the players, life goes on as if nothing had happened: PayPal received a license for authorization in the USA exchanging cryptocurrencies between your clients and third party wallets.

Circle, for its part, is still planning to launch a Euro (stablecoin) backed token: Euroc. An American company is already distributing another very popular stablecoin – USDC. “Yesterday, Europeans used dollar stablecoins. So tomorrow they will use stablecoins of the euro, controlled by the US regulator. What progress! » jokes Claire Balva, director of blockchain at KPMG, on LinkedIn. And add: “Meanwhile, in Europe, the goal of the regulator is to protect the consumer from European stablecoins, which do not yet exist. […] The United States has long understood how to use cryptocurrency to expand its influence. European denial must end. »

Falling prices attract attention, but the ecosystem continues to grow. Hodlers will definitely experience new conversions.