Cryptocurrencies: here for good, despite falling 62% in twelve months

While the total value of cryptocurrencies is down 62% this year to close to $881 billion, this new asset class is starting to take hold despite a tumultuous year.

• Also read: Krypto: Former FTX chief should be extradited immediately

• Also read: Celsius’ former CEO would withdraw $10 million

“This is the deflation of a bull market that has been going on since 2020. This is a return to the world,” sums up Martin Lalonde, president and portfolio manager of Rivemont.

At its peak, in November 2021, the valuation of cryptocurrencies exceeded 3 trillion, and by December 31, 2021, its value melted to 2.3 trillion dollars. He notes that today their wealth is 881 billion dollars.

“It’s a tough wake-up call,” said Ryan Tomicic, a partner at the BLG law firm.

“Promises of 20%, 30%, 40% or 50% risk-free interest and investment returns were not a reality,” he continues.

Lack of control

Homework is done for Charlaine Bouchard, Research Chair in Smart Contracts and Blockchain. Industry will be restored.

“The problem is fraud. This is not technology,” analyzes the Université Laval professor.

“Cryptos are here to stay. What’s missing is a framework,” he says.

According to Alexandre F. Roch, professor of finance at UQAM’s School of Management Sciences, even though bitcoin is still worth $23,000, we can talk about a “speculative bubble bursting.”

“With Selsey, we saw the kind of ‘bank panic’ we haven’t seen in decades. As soon as the rumor starts, true or false, people want to withdraw their money,” he observes.

As a result, exchanges such as Celsius, FTX and even Binance had to stop withdrawing money in turn, which deterred investors.

“Don’t expect all the protections we have here when you transfer your money abroad,” adds Alexandre F. Roch.

Like in 1933?

According to Louis Roy, partner at Raymond Chabot Grant Thornton and creator of their digital practice Catallaxy, 2022 feels like the 1930s.

“What happened this year is no different than what happened in 1933 when the stock market investment rules were in place,” he notes.

“There is a lack of white hair: management, internal control, being calmer in decisions,” the man concludes philosophically.

The Autorité des marchés Financiers (AMF) provides many tips on its website to avoid becoming a victim of crypto-asset scams.

Celsius drop

Over the past year, many scandals have shaken investor confidence in the cryptocurrency world, such as the brutal fall from grace of Caisse de depo et placement du Québec (CDPQ).

200 million dollars. That’s the amount Caisse de depo et placement du Québec expected to lose on the Celsius cryptocurrency platform, despite having “a solid management team that puts transparency and customer protection at the heart of its operations.” Alexandre Synnett, First Vice President and Chief Technology Officer of CDPQ in October 2021. Then, Newspaper Given “elements raised by a number of regulators in the US”, Celsi was found to be under the magnifying glass of the Autorité des marchés financiers (AMF).

A cascade of scandals later hit the firm. Ponzi scam allegations, the arrest of its chief financial officer, a data leak… the cryptocurrency platform with juicy interest rates of more than 10% has suffered a severe downturn. Last June, 1.7 million customers had their accounts closed and since then they have never been able to get their marbles back. After the company went bankrupt last July, its founder and former CEO Alex Mashinsky, who liked to wear a “Banks Are Not Your Friend” T-shirt to poke fun at traditional financial institutions, has been less active on social media than before. Finally, let’s remember that last month Newspaper Alexander Synnett, the boss responsible for the Caisse’s failed investment in Celsius Network, has announced that he will be hit with the biggest pay rise in 2021. In addition to his $370,000 salary, he has $900,000 in earnings bonuses. $1.27 million, or 32.9% more than in 2020.

The collapse of FTX

His fortune was close to 23 billion dollars in September of last year Forbes. The young leader with black hair became the front page of business magazines. He is highly regarded as an entrepreneur. Some even saw him as the next Warren Buffett. But last November, the dream turned into a nightmare. 30-year-old multibillionaire Sam Bankman-Fried’s second-largest stock exchange, FTX, went bankrupt and its boss was charged with fraud and embezzlement. The US financial market watchdog, the Securities and Exchange Commission (SEC), even went so far as to accuse him of “building a house of cards based on deception.”

In total, the Commodity Futures Trading Commission (CFTC) estimates that more than $8 billion of FTX customer accounts were embezzled. Sam Bankman-Fried, a Democratic donor who was arrested in the tax haven of the Bahamas, was quickly extradited to the United States, where he had to pay a $250 million bond to be released pending trial. If the Caisse de dépôt et placement du Québec (CDPQ) did not invest in the controversial platform, it is not the case that in the province of Doug Ford, the Ontario Teachers’ Pension Plan (Teachers Fund) trusts $75. million. “Recent reports indicate potential fraud at the FTX, which is deeply troubling to all parties,” Teachers said last month.