From the thunderclap triggered by the fall of FTX to the climate of uncertainty linked to inflation and the War in Ukraine, 2022 marked the end of recreation for cryptocurrency players, after a euphoric 2021. Specialist in this field, Hasheur (600,000 subscribers on YouTube) deciphers for CNEWS the events of the year and discusses the prospects for 2023.
The earthquake caused by the fall of FTX, during the week of November 11, ended a dark year for cryptocurrencies. A sector which had nevertheless experienced a crazy year in 2021. In order to better understand the ins and outs of this market in full revolution, CNEWS asked Owen Simonin, alias Hasheur, for his expertise. The host of the first French-speaking YouTube channel dedicated to cryptocurrencies, but also founder of the company Just Mining, believes that the sector should be structured in 2023, but that many players will not survive.
What lessons can we learn from the fall of FTX, which was still the 2nd largest cryptocurrency trading platform in the world?
Today, there had not yet been a “too big too fail” in cryptocurrency-related businesses. The fall of FTX is therefore an example that reminds us that you have to know how to protect and store your cryptocurrencies by your own means, in particular via Wallets (Editor’s note: digital wallets). As they say: “not your key, not your crypto” (if you don’t have the key, you don’t have your crypto).
What consequences has this bankruptcy had on the sector?
We can retain four levels of impact: the first level is that all the people who had deposited funds on it now have their money blocked.
The second direct impact is the fact that all companies, which deposited money on FTX in order to obtain returns which they redistributed themselves to their clients, are also impacted. For example, company A offers 5% interest to its customers and takes this money from the customers to deposit it with FTX at 7% interest, naturally if FTX freezes the accounts, company A cannot reimburse its customers.
The third impact is a crisis of confidence. Because in addition to having defaulted when it was considered a serious player, FTX had said a few days before its bankruptcy: “we are proceeding with the withdrawal, you can withdraw your cryptocurrencies” and finally, they returned to what they said while saying: “in fact we cannot”. They have created a lack of trust, which affects everyone in the market. Now no one trusts the platforms anymore and people are fleeing from everywhere.
Finally, the 4th consequence is that this crisis of confidence has lowered the prices of cryptocurrencies. In addition, there is a domino effect that creates indirect blockages in some people who thought they were safe, or they had deposited money in a company that had funds at FTX or this company itself had money. money in another company that had funds in FTX, etc.
FTX had to go through lightning-fast growth stages and therefore botched a lot of thingshasher
Is all this symbolic of a still young sector?
Absolutely. FTX went from nothing to a box that was valued at $40 billion in just three years. So obviously this company had to go through some super-fast growth stages and so botched a lot of things. We realize this in the recent announcements. Apparently, they had no accounting department, the box had lent billions of dollars to its creator… It’s amazing.
And no safeguards were present…
The problem is that the safeguards, we are drawing them. The legislation was coming. Above all, there is a difference between creating a regulation and checking that it is properly applied. In the case of FTX, the company was regulated in the Bahamas…
The regulator will therefore audit companies in the sector more regularly, with the possible risk of having a regulator who is very strict and starts to sanction everyone.
What advice do you give?
You should first find out about the risks you incur when depositing your money on a platform and find out about the counterparties. All returns come with risk. You have to understand what it is and how the private key is managed, i.e. who holds the cryptocurrency on your behalf?
What conclusions can we draw from this very tense year 2022 for cryptocurrencies?
Basically bad. We first witnessed the comeback and the lull after the euphoria of 2021. But it was expected. What was less so are two big events in the crypto world, but also two big events in the traditional world…
On the crypto side, we had the UST which was presented as a stablecoin (Editor’s note: cryptocurrency whose value is linked to that of the dollar) but which lost its parity with the dollar, which did a lot of harm to the ‘ecosystem. And FTX at the end of the year, which no one saw falling, but which failed. So, there have been two “black swans” in addition to the expected decline in cryptocurrencies. This created a crisis of confidence.
At the same time, we are in a global context where the financial markets are afraid, we have inflation and the war in Ukraine, which amplifies the climate of uncertainty.
It will be difficult to have a year 2023 worse than 2022hasher
What will be the major trends in 2023 in this sector?
2023 will be a year in which we will learn from the curation of 2022. With all that is happening, only resilient players with real fundamentals and real resources will survive. This will remove some excess and unnecessary noise. There will be a structure and we know that there will be stricter regulation. I think it will be difficult to have a year 2023 worse than 2022. Which is good news. The problem with FTX’s downfall is that many virtuous companies will suffer the consequences.
Will we see new uses of the blockchain and NFTs?
It is in this kind of year that we build, because companies have nothing else to do. There is less demand and less money coming in. So companies have only one thing to do, which is to build solutions and new uses. Naturally, we will explore where the blockchain can bring about an evolution or a revolution, such as decentralized identity, NFTs, digital property in metaverses, decentralized finance. This last point being the consequence of the fall of FTX which was a centralized player, people will turn to decentralized structures.