The list of those disillusioned with “cryptomania” continues parallel to the list of alleged winners of this fun game of entering through one door or another, open to curiosity or greed, into the exciting world of cryptocurrencies.
As with any Ponzi scheme, the ardent supporters of these new digital financial instruments out of thin air are based on the belief of unsuspecting buyers that there is a way to make big money fast.
The excitement surrounding this is not new. Any technological breakthrough, from the invention of the steam engine to the invention of semiconductors, has always been accompanied by an abundance of more or less far-fetched initiatives that attract investors willing to risk losing everything in exchange for a meager chance to hit the spot. jackpot. Only after a typically long and frustrating period of trial and error around a central idea is a reasonable and stable choice of truly sustainable solutions gradually established.
A digital currency in its decentralized and anonymous and therefore arcane form has not yet reached this first level of maturity. Thanks to its support for the magical tool of the blockchain, it literally exploded in the markets spontaneously created by the craze for bitcoin, ethereum, and a host of other cryptocurrencies before occasionally crashing almost in full force. The blame is, of course, parachuting, since, as Laurie Heinel, chief investment officer of State Street Global Advisors, one of the largest asset managers in the world, recalled last week, “cryptocurrencies have no intrinsic value; they are only worth the price they are willing to offer” (“Im Grunde kauft man also einen Vermögenswert, der nur so gut ist wie das nächste Angebot” (“NZZ” of 10 June).
And the drop is sometimes spectacular: Bitcoin’s latest price (27,228 francs on June 12) is half that of March 28, which itself is far from its all-time high on November 9, 2021 (61,056 francs).
“Any technological breakthrough has always been accompanied by more or less far-fetched initiatives that attract investors who are ready to lose everything in exchange for a meager chance of hitting the jackpot.”
In its more academic version, the approach to the phenomenon of digital currencies focuses primarily on the risks they pose to the financial system as a whole, and highlights their limits, which are much narrower than one might imagine. Whereas, like classical finance, where the generalization of an instrument makes it more efficient and less expensive due to economies of scale, an increase in the volume of exchanges in any of the cryptocurrencies makes each transaction slower and more energy-intensive. Which, moreover, explains why new ones are constantly being created, which was very well demonstrated by one of the speakers (namely Christopher J. Waller, Board Member of the US Federal Reserve System) at a conference on crypto assets recently organized by SNB and CIF (“Center for Innovative Finance” ) of the University of Basel.
In this kind of circle, we are looking at many aspects of the evolution of decentralized finance that we are still trying to define, to certainly better frame them, to be said to protect the average investor by an uninformed definition, but also and perhaps above all to prepare the ground for the emergence of central bank digital currencies that will put everyone back on the right path of financial regulation.
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OpinionMarian Stepchinski