The crypto market exceeds US $ 3 trillion – but what is the real value?

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The combined total of the cryptocurrency market was valued at $ 3 trillion, for the first time, but the rising value is being offset by the number of risky and highly volatile crypto assets currently prevailing in the market. sprouted and disappeared just as quickly – sometimes leaving inexperienced traders in a bind and holding a worthless bag

The combined value of all cryptocurrencies topped $ 3 trillion for the first time this week, as more traditional investors rush to and support the crypto market, competently backed by the digital asset maximalists who believe blockchain-based digital currencies are the future.

But as the combined valuation of the crypto market hits all-time highs, the space has also become a bit riskier with the meteoric rise of various crypto assets that don’t appear to be backed by anything substantial – this which leads many to wonder if it is volatile. Crypto trading will never really settle into a stable routine.

As bitcoin leads the way – hitting an all-time high of US $ 68,513 today as the world’s most popular virtual unit rides a wave of feverish speculative demand – investors buying new cryptocurrencies are the unintentional prey to scams. “Any team can develop an app and issue a coin,” noted Martha Reyes, head of research at cryptocurrency trading platform Bequant.

One of those dubious digital currencies is inspired by Netflix’s hit Squid Game and is known as “Squid coin,” which was released last month without Netflix’s permission, and within days it went live. value soared before dropping to a valuation close to zero.

Once the market value of all of its coins surpassed US $ 30 million, investors then discovered that they could not cash out their winnings. Instead, the creators of the Squid coin disappeared from social media, as did investor profits, reflecting other cryptocurrency scams.

The apparent scam has been described as a “carpet draw” in reference to a carpet torn from under the feet of investors. “A carpet-draw is just one of the many ploys by which naive retail investors are drawn to the hope of quick riches, leaving them vulnerable,” Eswar Prasad, an economist at the American university, told AFP. from Cornell.

The financial “Wild West”

Kim Grauer, research director at Chainalysis, said the rapid growth of decentralized finance (DeFi) “and ambitious investors have created a favorable environment for draw-pile scams over the past year.”

Earlier in 2021, Gary Gensler, who chairs the US market watchdog SEC, compared the crypto industry to the “Wild West.” Grauer said the crooks operate globally, although many, like their victims, are in Eastern Europe.

To purchase coins from Squid, investors had to be logged into a decentralized platform known as PancakeSwap. Unlike large cryptocurrency exchange platforms such as Coinbase which is registered by US and European regulators, DeFi projects like PancakeSwap avoid a third party and therefore anonymity is often possible.

A Bitstop Bitcoin ATM setup at the 2021 Bitcoin Convention, a cryptocurrency conference held at the Mana Convention Center in Miami, Florida. (Photo by JOE RAEDLE / GETTY IMAGES NORTH AMERICA / Getty Images via AFP)

French lawyer Romain Chily, whose cryptocurrency firm ORWL specializes in, says he sees new scams every month. According to him, DeFi is “full of products that work well enough – but for sophisticated investors.” Chily added that the chances of recovering investments from scams are “extremely slim”.

Expensive memecoins litter the crypto market

Even regulated platforms are home to cryptocurrencies that leave a lot of people skeptical. Since the start of the year, two dog-themed units have seen their values ​​skyrocket – Dogecoin created as a joke in 2013 and Shiba Inu born in 2020.

Such internet phenomena are nicknamed memecoins and are particularly volatile transactions. But experts are keen to point out the differences between these cryptocurrencies and scams. “It’s a branding exercise,” said Reyes, who likens the skyrocketing memecoins to companies like AMC Entertainment and GameStop who saw their stock prices rise earlier this year.

An army of amateur investors – many of whom were exchanging advice and opinions in a popular forum on Reddit – had bought shares in the companies in defiance of hedge funds who had bet stocks were going to collapse.

© Agence France-Presse

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