As spring breaks out in all its splendor, crypto assets settle into their own winter. Operators who have been moving in this world for a long time repeat ad nauseam this meteorological metaphor: the great cold in prices, which is something that usually happens every time, a correction after so many excesses. However, this time the collapse is of such magnitude that borders on panic.

All major cryptocurrencies have this week lost more than 50% from their all-time highs, with some reaching more than 80%. After the blow of the last few days, bitcoin has erased all its annual gains until falling to the lows of June last year. Bearing in mind that (as the European Central Bank reported a few weeks ago) the market value of crypto assets, some 2.2 trillion euros, is already double that of subprime mortgages before the 2008 crash, it is understandable that analysts questions are asked. And when in Spain 12% of adults have invested in cryptocurrencies with some transactions, some 60,000 million euros, which is equivalent to almost 5% of GDP, any sharp downward movement raises suspicions about the soundness of the system.

As if that were not enough, Coinbase, the main reference platform to operate with these assets, has had to publicly report, after failing to meet its estimates for the first quarter, that there is "no risk of bankruptcy", a sign that this possibility has been I studied at some point, as Nicholas Taleb, the creator of the famous expression “black swan”, said.

Very hard was also the famous oracle of the markets, Warren Buffett, when referring to bitcoin a few days ago. “If you offered it to me for $25 I wouldn't take it. What would you do with it? It doesn't multiply or produce anything." Jackson Palmer, founder of Dogcoin (which has lost 78% in twelve months), who is now detached from this sector, made some comments in June that gave a lot to talk about at the time, but not so much today. “The cryptocurrency industry takes advantage of a web of shady business connections, bought influencers, and pay-per-play means to perpetuate the get-rich-quick tale to extract money from the naive and the desperate.”

However, it is true that you have to look at the data in perspective. If the annual minimums that bitcoin has touched in each year are reviewed, these have always grown. That is to say, that each year that it slips, it rises at a higher level than the previous one. In 2020 the floor was touched at $3,800. In 2021 we are close to 25,000.

Same speech if you look at the profits made by investors who bet on this currency years ago. Even after the collapse of recent days, in five years the return is close to 1,700%, while in three years it is close to 400%. Seen this way, this cryptocurrency does not seem like a bad investment either.

Likewise, the panic in the markets is not being accompanied by a lack of acceptance of this type of asset, quite the opposite. The financing rounds of crypto-asset firms follow one another incessantly, after El Salvador bitcoin acquires official currency status also in another country (Central African Republic), Gucci informs that it will accept cryptocurrencies in its purchases, etc...

The winter of cryptocurrencies is due to several factors. The economic cycle has changed. Inflation has skyrocketed. This in itself should not be a problem, because cryptoactives aim to protect against the devaluation of official currencies, by offering higher profits and, as in the case of bitcoin, their volume in circulation has a finite amount. But when rates rise, risks increase and other investment opportunities open up (fixed income, deposits) with recomposition of portfolios. In this context, the appetite for an asset like bitcoin, so volatile, decreases. “We view crypto assets essentially as a portfolio bolster rather than a safe haven,” said analysts at Swiss bank Julius Baer.

Victoria Gago, co-founder of the European Blockchain Convention (an event that will take place next month in Barcelona), downplays the current correction that the market is experiencing. “Every year new people enter with little knowledge, it is normal. We must also keep in mind that bitcoin is one thing and the universe of thousands of private cryptocurrencies that circulate on the network is another, ”she points out.

And here is the case of so-called algorithmic stablecoins, such as UST, which is a cryptocurrency linked to the dollar through a complex financial and mathematical mechanism. Its spiraling descent infected the rest of the 10,000 cryptocurrencies, a universe that some experts do not hesitate to define "the anarchy of the Wild West".

Martín Piqueras, professor at the OBS Business School and digital expert at the consulting firm Gartner, summarizes what happened this way. “There are companies that have invested heavily in these assets. It is estimated that 16% of global investments are in cryptocurrencies. Some of these companies have an interest in influencing valuations for the sole purpose of enriching themselves. And they favor one currency at the expense of another,” he comments.

This expert calls to distinguish technology from speculation. “There are people who have become hooked on crypto assets like bumper car tokens at fairs. Unaware that once the installation disappears and the event ends, the token is no longer useful. And it is necessary to introduce some element of regulation to prevent certain users, especially the youngest, from being attracted by the lure of an easy profit”, warns this professor.

However, he specifies, “the technology that is behind them, such as the blockchain [block chains] is unstoppable. It has come to stay. It will be part of our daily digital life as it was years ago with email. But for this to happen, it is likely that in the future cryptocurrencies will be associated or linked to some physical reference value, such as the GDP of a country.

“Cryptocurrencies tend to be described as a casino, where you win or lose. But no: their technology is at the base of decentralized finance and they create a reliable system, which does not break, with clear rules”, objects Emanuele Giusto Kantfish, author of the book Crypto jungle (Norma, 2021). “What happens these days is that we are in a still very young market. Winter is physiological. There is a lot of speculation and users who enter as tourists. This has meant that crypto assets are following the evolution of the Nasdaq, which is also falling”, explains Giusto Kantfish.

Despite this week's crash, this author is very confident in this technology. “The same thing happened with low-cost airlines. Flag carriers said they were not sustainable. And in the end they were the ones who went bankrupt.” However, Giusto Kantfihs also believes that some kind of intervention is necessary. “It is good that crypto assets operate without anyone’s control, but at the same time some regulation is necessary to avoid problems, especially with currency-linked cryptocurrencies, which can have serious consequences for the system.”

On this point, the Swiss company 21Shares explained that “the last few hours have revealed some weak points in the structure on which the algorithmic stablecoins are based, as they do not offer guarantees and are not subject to any regulatory framework. In addition, there is no rule that requires companies that manage these types of assets to maintain adequate reserves.

While all eyes are on the crash in the markets, security issues also continue. Last March, the Ronin Network platform announced a theft equivalent to 620 million dollars, the largest in history. According to data from Comparitech, over five billion euros have been stolen from virtual cryptocurrency wallets over the years. And it's not just the robberies, but the ransoms and money laundering. “It is necessary to go one step further, because 100% of criminal transactions take place through cryptocurrencies. In practice, the briefcase with the black money has disappeared. For this reason, we must seek a supranational agreement between the different states to put an end to this phenomenon”, sighs Professor Martín Piqueras.

In the crypto world there is a long way to go. Waiting for some consensual regulation to arrive, it is not the first nor the last crisis. As Albert Camus wrote, "in the depths of winter I finally learned that an invincible summer dwelled within me."