Whats NFT: NFTs are just the beginning of the cascade of billions from cryptos that will invade the economy

Whats NFT: NFTs are just the beginning of the cascade of billions from cryptos that will invade the economy

 

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Cryptocurrency holders could spend part of their wealth and impact the real economy.

 

NFTs are just the beginning of the cascade of billions from cryptos that will invade the economy with Sebastian Laye and Michel Ruimy.

 

Atlántico: We are talking more and more about cryptocurrencies and the sums involved are always higher. And the data indicate that crypto ownership is concentrated in a small number of wallets. Should we expect to see the billions linked to cryptocurrency entering the real economy? How much are we talking about?

Sebastian Laye: The total value of cryptocurrencies or cryptoassets has stabilized at around 2 trillion ($2 trillion), half of which are bitcoins, despite peaking at almost 3 trillion a few weeks ago.

 

These sums are certainly considerable, but lower, for example than the market capitalization of Apple, which bodes well for good future potential. In addition, many shareholders have also enriched themselves by their holding of shares in the sector (Coinbase, Binance, FTX, etc.), which means that the total net wealth created by the sector is greater than this market capitalization of cryptocurrencies alone or cryptoassets (I prefer this second term) itself.

Holding cryptoassets is quite popular. In France, a recent report by KPMG shows that 8% of French people have held or hold cryptos and that 26% of them could vote according to the positions of the candidates on the subject.

 

Despite this popular craze, which concerns many young people, positions in cryptos are concentrated, with 70% of bitcoins held by large investors (who are qualified in trading jargon as whales or whales). Whats NFT - The phenomenon is even more obvious for the smallest cryptocurrencies, linked to a blockchain project or an ICO. I see two reasons for this. In the case of bitcoin, large specific investors - for a long time - and more recently traditional institutional investors have accumulated significant positions, sometimes also resulting from the activity of miners, the players who regularly "create" this currency. There is also the phenomenon of sponsorship linked to the launch of a new crypto or blockchain project. Instead of creating a company that captures all the value of a sector and enriches themselves with commissions, for example, entrepreneurs in the sector launch currencies or tokens linked to the project Whats NFT.

 

They are remunerated by a large initial distribution of this token: thus by construction, cryptocurrencies always have a few founders somewhere holding a large percentage of the cryptocurrency. This is also the case with Bitcoin and its mysterious creator, whose initial cryptos must be worth at least 100 billion today. Cryptocurrencies always have a few founders somewhere owning a large percentage of the cryptocurrency.

 

This is also the case with Bitcoin and its mysterious creator, whose initial cryptos must be worth at least 100 billion today.

 

 

 

Whats NFT: Cryptocurrencies always have a few founders somewhere owning a large percentage of the cryptocurrency. This is also the case with Bitcoin and its mysterious creator, whose initial cryptos must be worth at least 100 billion today.

 

This value is ultimately more liquid than shares, for example, in an unlisted company. If only 5% of the value of assets were spent in the real economy, this would represent an injection of 100 billion. In particular, many hidden fortunes could finance other sectors: infrastructure, real estate, industry, luxury, consumer goods.

 

Michel Ruimy:  Of the approximately 16,000 cryptoassets already created, only around 10,000 remain today and the disappearances have not always been explained. So far, the incidents have had no noticeable effect on the stability of the financial system.

 

To weigh on the real economy, these media must in particular be used as a means of payment. However, this requires, in particular, a greater stabilization of prices to consolidate the confidence of holders, buyer and seller, a binding and clear legal framework in its use, its investment and its price, an ever-increasing evangelization on the part of traditional players (banks) and new entrants… Thus, investment in these media must be made more for its use than for its price and its speculation.

 

However, the democratization of crypto-assets as a means of payment is not yet done today: very low percentage of transactions carried out in e-commerce, high withdrawal costs from physical distributors (7-8% of the amount withdrawn), less than 1% of cryptocurrency holders use their wallet as a means of payment USD, after a peak of 3,000 billion in November 2021.

Whats NFT - A significant amount of course, but to be put into perspective. The daily volume traded on the Forex market, for example, reaches 6.6 trillion USD!

 

For all these reasons, the conversion of cryptoassets and their penetration into the real sphere does not seem to be a topical issue.

 

However, cooperation between countries should be strengthened to better monitor developments in this ecosystem and strengthen their regulations to limit the risk. The idea would also be for the public authorities to adopt the digital currency themselves. Already, many central banks (Banque de France, European Central Bank) are working on setting up digital currencies using blockchain technology. For them, it would not be a question of positioning themselves on the crypto-asset market, but of making exchanges of national currencies more fluid, with faster and more reliable digital devices.

 

What could be the positive or negative consequences of this massive influx of money from the real economy?

 

Sebastian Laye: There are still tax and regulatory obstacles to the full concrete use of these fortunes. There have been a few transactions in cryptos on real estate or luxury goods, but most of the time; the conversion into dollars is a must. Whats NFT - Thus, the fortunes of the sector have tended to reinvest in other digital assets, such as NFTS: the enthusiasm for the latter stems from the fact that they constituted an outlet for bitcoin fortunes. The concrete impact can therefore only be gradual according to regulatory changes and uses.

 

 

 

 

The State of Colorado has just announced, for example, a project to allow the payment of local taxes in cryptocurrencies. We should not expect a sudden wave of consumption due to the reinvestment of these fortunes. Furthermore, the big money in the industry tends to stay in the industry and not liquidate their cryptos. They know it would cause a crash in their industry. Whats NFT - Finally, a fortune in cryptos is in the same situation as a classic fortune with stocks; his goal is to sell 1 or 2% of his assets each year to diversify or finance his lifestyle. Cryptocurrency money will essentially remain in the crypto ecosystem.

 

Michael Ruimy: If crypto-assets become more popular, the potential impact on the economy could increase as more and more traditional financial institutions become involved in this compartment. Thus, a crisis of confidence in the sector could be transmitted to the real economy and destabilize it. The transmission belts between these media and the real world are found, in particular, at the level of central banks, which regulate the quantity of money in circulation to guarantee price stability, the level of inflation, or even that of interest rates. Whats NFT - The generalization of crypto-assets could therefore limit the ability of central banks to act and generate serious risks for the economy, particularly in emerging countries where they have developed strongly.

 

The fact remains that in the long term, the currency should fully enter the digital era. Monetary digitization, both public and private, will redefine the role of banks and could pave the way for a more responsive and productive “technological finance” than the current “bureaucratic finance”. It thus brings hope in terms of simplifying economic processes.

 

 

The challenge is colossal because the reality with which we will be confronted in the coming years will notably be that of a mountain of debt (insurmountable?) which will threaten to collapse in the absence of massive involvement from the political and monetary authorities. Whats NFT: This should be an opportunity to redefine a new financial system model, including the digitization of money, with the imperative of stability and the promotion of the real activity. It is in this sense that the digital currencies of central banks can play a considerable role. 

 

What could motivate crypto holders to spend part of their wealth and thus lead to this influx of money?

 

Sebastien Laye: The evolution of uses (online merchants increasingly accepting cryptos directly) and regulations (possibility of paying taxes or administrative service, simplification of taxation). In France, for the moment, fortunes in cryptos have often exiled themselves to other countries due to ubiquitous taxation. The subject goes far beyond the bitcoin trader. Whats NFT - An entrepreneur in the metaverse, for example, has a business model based on issuing a cryptoasset. If the administration treats him like a bitcoin holder, the economic equation will struggle to work in the long run. French taxation is destroying the potential of different sectors: virtual universes, metaverse, AI.

 

Beyond the French case, I believe that the question of diversification is key in the reinvestment of sums: the great fortunes of the sector, entrepreneurs, once past the stage of creation, will strongly seek to crystallize part of their gains and to diversify. It is a principle of sound management. In this view, recognition or reinvestment principles should also be mature, making it simpler to convert this wealth into real assets.

 

The property industry, for example, could improve from this success during the approaching years. Credit or reinvestment platforms should also be developed, making it easier to convert this wealth into real assets.

 

Michel Ruimy:  The estimate of financial soundness is commonly the voicing of an accounting, corporal and tangible reality. However, the evolution of market finance has been able to gradually lead to a decorrelation between the value of an asset and its economic fundamentals (see GAFAM, Amazon, Tesla, etc.). Whats NFT - It now no longer follows the “cash-flow” economy but an invisible trust, an immaterial goodwill, of which the quotations of certain crypto-assets can be the final expression. Believing, is an important remedy of all inflationary macroeconomic operation, is now indexed and subject to the interplay of supply and demand for confidence.

 

How about cryptoassets that bank on decentralized blockchain mechanics that assures to rebuild trust? Organisations commonly call-out weaknesses in their functional, regime and risk procedure. In recent months, crypto-asset platforms have experienced major disruptions during episodes of turbulence, not to mention the resounding cases of computer hacking which resulted in the theft of funds placed by users. Trust is not yet fully established.

 

Whats NFT - Is that bad? Not so long as speculation only ruins speculators, because certain surveys relating to the profile of investors show that it is generally a young (under 35) and heterogeneous population: business bosses, unemployed, grafters, people who have the expertise in gambling. But also corporal investors (political sensitivity is a determining factor here too!) in particular looking for returns, long-term investments, protection against inflation or even a lack of trust in banks.

 

As soon as these last conditions are not met, it could be that an opposite movement can be observed.