despite the crash, investors risk buying bitcoins

Volatile but still attractive. Despite the “cryptocurrency winter” that hit decentralized digital currencies in early May, enthusiasts continue to shop for their favorite tokens, foremost among which is bitcoin. The asset, which influences all other prices (NFT, Ether, stablecoins, etc.), nevertheless hit rock bottom in June, below $19,000, its lowest level since December 2020. The fall is dizzying, to -72% from its November 2021 high (at $68,991). Overall, the collapse of all cryptocurrencies is even more marked, with global capitalization which fell by 800 billion in one month, even briefly falling below 1,000 billion dollars in June.

However, pro-bitcoins do not admit that their favorite asset was defeated by the rise in central bank rates which triggered monetary tightening and sounded the death knell for risky positions in the midst of soaring inflation. Quite the contrary. Not only, according to them, is there enough to minimize the fall, but the stagnation in troubled waters of bitcoin around 20,000 dollars per unit would above all be the sign of a favorable period for shopping, according to the old stock market adage“buy low”.

“Buy the Dip is just sales. We try to increase exposure when bitcoin is at its lowest. So I started buying it back, as soon as it started to move below 45,000 dollars. There, at 20,000 dollars, I buy back much stronger »explains to The gallery Owen Simonin, France’s leading cryptocurrency influencer and CEO of Just Mining, a company specializing in crypto investing.

Bitcoin VS the bubble

“That’s not to say bitcoin can’t go even lower. But since I have a lot of cash, I sell stablecoins (cryptos backed by the price of a traditional currency, editor’s note) for cryptocurrency, bitcoin and ethereum because I think cryptos will recover. That’s how I’ve built my biggest profits in the past.”, he justifies. This strategy of averaging downwards is not without risk, however: a value can always fall again by 99%, after an initial fall of 99%. This is notably what happened to Internet stocks when the bubble burst in 2000, as critics of the “buy the dip“.

Other crypto experts also denounce the practice which they consider reserved for “maximalist bitcoiners” (those who consider the token created by Satoshi Nakamoto as the only real cryptocurrency). ” Unfortunately, for the majority of alt coins (alternative tokens), ‘buy the dip’ simply does not work in a bear market”warns one of them on Twitter.

The whales and the bear

But for the big investors – called the whales »this “bear market“, can precisely be an opportunity to maintain its positions, or even strengthen them. According to BitInfoCharts, between June 14 and 18, 2022, one of the largest whales swallowed 1,698 bitcoins, bringing the value of its portfolio to more than 2 billion dollars. Fervent supporter of cryptos, the whimsical Elon Musk, boss of Tesla and SpaceX, also confirms on Twitter on June 19, in the midst of a crash, that he will continue to support dogecoin”, a cryptocurrency created initially as a gag, kept willy-nilly afloat thanks to its star influencer. This crypto has nevertheless lost more than half of its value since January. An investor has also filed a complaint against Elon Musk and his companies Tesla and SpaceX for this unlimited support for dogecoin, claiming no less than 258 billion dollars.

“The cryptocurrency market is currently experiencing its fourth bear market, a stressful time for investors, particularly in the short term, but this phenomenon should not spell the end for bitcoin and the cryptocurrency market”abounds Vincent Boy, market analyst at IG France.

Déjà vu

In fact, for the most adept in the crypto markets willing to take on the risk, the deja vu argument wins out. “We are living a copy-paste of 2018. It’s the same little music, every 4 years, since 2009”, even fun Owen Simonin. “It’s cyclical. These crashes always occur after a halving (computer process inherent in bitcoin which reduces the number of tokens remunerating miners and therefore its rarity on which its value is based).says the entrepreneur who is betting on the long-term decline in the volatility of the precious token and Ether because “ more resilient”.

“In 2011, the lowest recorded on bitcoin was 0.29 dollars and the upward movement that followed allowed the cryptocurrency to reach a high of 32 dollars in June of the same year. The second bull market (bull market, editor’s note) was observed in 2013, with an annual low of 13.16 dollars and a high of 1,242 dollars. The third, which made cryptocurrencies known to a large number of investors, occurred between 2015 and 2017. The low in August 2015 was $200 and the bull market for more than 2 years, led Bitcoin at a historic high of $20,000. All these bull markets have been accompanied by impressive bear markets, but so far bitcoin has always reached new all-time highs thereafter,” explains Vincent Boy.

And to conclude: “The last bull market ended last November at a historic high of $69,000, an increase of 1,700% (from $3,900 in March 2020) and this naturally leads to a new bear market, in which we are currently “.

Cryptocurrencies: three questions about the crash that knocked bitcoin off its pedestal

On Twitter, Nicolas Chéron, market strategist at Zonebourse, goes in the same direction, even illustrating the phenomenon with twin curves. “Markets are volatile, but innovation and productivity are constantly increasing. Think long term and you will come out a winner”he adds.

Better, Bitcoin would even strengthen thanks to the crashes, according to those who keep faith in the token despite the storms. “This crisis allows a natural Darwinist selection of the various “crypto” projects (many of which have an anecdotal or even non-existent utility) and above all it allows to put back on the front of the stage the incomparable properties of bitcoin: decentralization, invulnerability, digital scarcity, resistant to censorship, immutable monetary system, tamper-proof means of payment without trusted third parties, scalability via the lightning network, individual monetary sovereignty, etc. »says Jonathan Herscovici of StackinSat, whose startup has developed a “Bitcoin Savings Plan” promising better investments than traditional banking products.

Regulate the roller coaster

Still, the new champions of cryptos, who once recruited with a vengeance, must now reduce their sails. With the crash, the crypto buy-sell platform Coinbase was caught up in immediate reality and announced that it was going to cut 18% of its workforce, or around 1,100 positions. “It looks like we are entering a recession after an economic boom of more than 10 years“, advanced Brian Armstrong, co-founder and managing director of the company, among the justifications for these massive layoffs.

“A recession could lead to another ‘crypto winter’ and could last for an extended period”he still fears.

Facing him, his competitor Binance and its 120 million customers takes the opposite view. After having already filled 6,000 positions, the Chinese will create 2,000 more by the end of the year. The current crisiscreates concerns, but we expected it, it’s not unusual”opposed the crypto-billionaire Changpeng Zhao, one of the most listened to voices in this environment.

Also, while the arrival of institutional funds in the crypto star in 2020 has changed the situation, increasing the correlation of bitcoin to the markets, these players are maintaining their positions in the sector for the time being. Thus, Goldman Sachs, of which one of its analysts had predicted a bitcoin at 100,000 dollars, does not seem further cooled by the recent decline. The investment bank is in discussion with the Singaporean exchange platform FTX to facilitate derivatives trading on the markets, according to the specialized press.

There remains another unknown, with the regulation of the sector, which some now want to fully model on banking regulation. This roller coaster of cryptos fuels the arguments of regulators to come and set up “safeguards”, in Europe as in the United States. According to the ECB, which has identified 16,000 cryptos, the market has lost more than half of its value in just six months. Everywhere, the authorities are tightening the screws to better regulate a still recent market, in order to also favor central bank digital currencies (MNBC) in the long term.

“The market will be regulated but not prohibited”tempers Owen Simonin who planned to resell these bitcoins “when there is a frenzy, times seven”. “I look forward to the day when bitcoin can be defined as a store of value which will bring it stability. It is the currency of the future, in 5 to 10 years”he enthuses.