Foto de Shiva Smyth
Cryptocurrency is a roller coaster ride, and we need to learn what it is for.
I was wrong to buy Coinbase shares when it went public at the height of the crypto-summer boom in 2021. I still have an average price of $325 per share in my portfolio, and although it is up more than 10 percent today, Coinbase is trading at $64.84. That’s a decline of more than 80 percent from its initial value. The evolution of cryptocurrencies matches Coinbase’s volatility, and professional brokers know it.
Jaume Puig, CEO and CIO of GVC Gaesco, a well-known Spanish financial management company for fixed and variable assets, said several times: “This is not the time to invest in growth stocks but in value stocks.” But, of course, when he meant growth stocks, he wouldn’t be thinking of Coinbase, a business model that financial experts consider high-risk or directly non-sense investments.
At a recent conference invited by la Caixa, the leading Spanish financial bank, I learned that bankers refer to sandboxes when discussing financial inventions like cryptocurrencies. According to these experts, sandboxes are where entrepreneurs like Brian Armstrong or Fred Ehrsam, the founders of Coinbase, are building sandcastles.
Coinbase had a meteoric valuation when it went public in 2021. In just nine years, it went from a startup to having a stock market value above that of an oil giant like BP. They made considerable efforts to meet all legal requirements in USA and Europe and are now operational in nearly 200 countries. That’s almost the whole world, quite a vast sandbox!
But crypto winter arrived, as many had already warned. The sandcastle collapsed. Coinbase’s valuation broke down and fiat currency managers rubbed their hands. The value of cryptocurrencies depends on the value believers want to give them and has no guarantor beyond the blockchain algorithm. Although dollars or euros have no tangible counter value like gold in the past, at least they have the guarantee of a state. If you have 10 dollars and you go to the bank to exchange them, they give you the equivalent value in euros and keep those greenbacks without fearing that they will lose worth in the short term.
On the other hand, having a few tens of Cardanos, whose equivalence to the Euro is fixed at 0.33 Euros per unit just now, has lost 70% of its value in only one year. So, if you had the equivalent of 10 euros in Cardanos, now, you barely get back 3 euros if you exchange it. This is true even though Cardano is today the fifth most popular cryptocurrency, according to Coinbase.
The bad thing about cryptocurrency is not the idea but the use that speculators give it. If you carefully read the Whitepaper on the mission of many cryptocurrencies, they have never been created to serve as speculation. On the contrary, the idea behind cryptocurrency is stability and freedom from a minority determining its value. Just speak to the Lebanese pound holders and what they think about their fiat currency. The value of a cryptocurrency is determined by its holders, and if it does not have widespread use in the real world, it will be subject to significant swings. Panic movements will alternate with periods of hope for irrational profits without any basis.
Even so, I don’t believe I did invest in the wrong company; it looks a little expensive in my portfolio but exciting. Coinbase simplifies the management of this complex world and strives, just like traditional investment institutions, to make its users tax compliant. Coinbase’s debit card is already in use in the real world. You can now buy bread with Ethereum, Cardano, Amp, Bitcoin, or many other cryptocurrencies. Of course, if panic sets in, you may be left without a sandwich that day. Breakfast is not guaranteed until the baker can pay for flour in cryptocurrency. Now, we may not be so far away from seeing it.
Philipp Fürst 