What can I do with my “crypto”?

Bitcoin fell 50% in six months after touching 60,000 euros in valuation; Meanwhile, Ethereum is down 45% from its peak. The reasons go beyond the US Federal Reserve’s rise in interest rates, the lack of supply, the uncertainty of oil and the context of war. The biggest impact is responding to the virtual disappearance of some so-called stablecoins, whose name paradoxically stands for stable currency, creating a capital flight from virtual currencies.

“A few factors come together, but the main thing is to try to stabilize something digital. It’s a delusion and cryptocurrencies are designed in such a way that no one controls them,” says Martín Piqueras, professor at OBS Business School and digital strategist at Gartner. This refers to the stablecoin Terra (Luna/UST), whose value is artificially tied to the dollar. Now, overnight, it saw its price separate from the US currency and lost 99% of its value.

Stablecoins basically want to offer an intermediary deposit between one cryptocurrency and another so that they don’t have to sell for traditional dollars or euros. “The bankruptcy of Terra (Luna/UST) has created a period of distrust that has spread to all markets in general,” explains XTB analyst Darío García.

And it also affected the financial and emotional stability of the people who trusted his operation. “My $170,000 was $7,000. That amount was less than the amount of debt he had accumulated by buying. I fell into a deep depression,” wrote a user on the Reddit r/TerraLuna subsite. Another investor on the same website said, “I can’t believe this is happening. “I lost $60,000 overnight in a potentially risky asset three days ago and I can’t do anything about it.” In the most extreme cases, suicide seems the only way out: “I lost more than $450,000, I can’t pay the bank. I’m going to lose my house soon. Suicide is mine. The only way out.”

Most investors belong to the fast culture: “They rely on the fact that their brother-in-law has doubled their money or Internet opinions,” warns Piqueras.

The fact is that, according to the Bank of Spain, from the beginning of 2020 to November 2021, the market value of the main crypto assets has more than 13 folded. And that’s after Bitcoin lost 80% of its value in 2018, a much higher percentage than the last drop. Therefore, the advice of the main experts would be not to get carried away with emotions and put up with the tension without selling. In any case, analysts emphasize that it is not possible to generalize because each case is different.

“When they reached the minimums, they went up later. According to Alberto Gordo, co-founder of Protein Capital, all that’s left is not to be driven by market sentiment because it’s the worst time.” .

The need to recover the money and the time horizon of the investment determine the strategy. But in the long run, “money has already been lost in the short run, especially if it concerns minority currencies. There is nothing else to do,” says Protein Capital expert.

According to the CNMV, although Spain was one of the first countries to oversee the advertising activities of crypto-assets, the future will be marked by a regulation limiting the activities of cryptocurrencies. “There will be, and probably will be, only cryptocurrencies in the future, but certainly in another format that is much more supported, like the one discussed in the European Community with the digital euro,” Piqueras explains. In this case, they will likely have greater freedom of use and a guaranteed value. While this is not expected to happen with existing currencies, it is only expected to happen with new currencies that have not yet reached all citizens.