The cryptocurrency crash of recent weeks has led many to fear a repeat of the 2008 economic crisis. In a matter of months, the value of these digital assets has fallen by more than $2 trillion and many Retailers have lost their life savings for an investment that was considered safe. However, it must be taken into account that the capitalization of this cryptocurrency market is less than 1 trillion dollars, practically nothing when compared to the US GDP, which amounts to 21 trillion dollars. But above all, the main difference from the bubble suppression is that crypto is not tied to debt.
There is no doubt that a whole culture has been created worldwide around these digital assets, with stars advertising them or exchange platforms sponsoring sporting events. In the case of the US, households in this country own a third of the global cryptocurrency market, according to estimates by Goldman Sachs, while 16% of US adults have invested or carried out some type of transaction with these digital assets. As a result, the US could be more exposed than other states to a possible sell-off in the cryptocurrency market.
However, cryptocurrencies are not like most classic assets. They are not expected to remain stable in value for a certain period of time and are therefore not used as collateral to apply for a loan.
At best, what investors do is use a cryptocurrency “to borrow to buy another digital asset,” Joshua Gans, an economist at the University of Toronto, tells CNBC. It’s something “more or less contained in the cryptocurrency world,” Gans adds. A theory that supports recent research carried out by Morgan Stanley, which shows that the main applicants for cryptocurrency loans are investors and companies in this same sector. Also, despite having expressed interest in cryptocurrencies, the holders of digital assets are not institutions, says venture capitalist Kevin O’Leary.
For all this, experts consider that the level of exposure of the US banking system to the cryptocurrency market is not like that seen in other financial crises and a hypothetical sell-off poses only a “limited” risk.
The same goes for the exposure of US households. His net worth reaches 150 trillion dollars, of which only 0.3% corresponds to cryptocurrency holdings, far from the 33% represented by investments in shares, according to the Goldman Sachs note published last month. Some figures that lead the entity to expect that the aggregate expense resulting from the collapse of these digital assets will be “very small”.
Likewise, some Wall Street analysts see the current crypto winter, rather than as a problem, as an opportunity to purify the sector. That is, a stress test to eliminate weak or defective cryptocurrencies. For Alkesh Shah, an expert in cryptocurrencies and digital assets at Bank of America, part of that weakness is due to inflation and interest rate hikes by the US Federal Reserve, which have hit the technology sector hard.
Bitcoin mining consumption also falls
Much has been said in the last year about the enormous amount of energy consumed by computers designed to mine this cryptocurrency. Specifically, before the collapse, the entire system used more than 200 TW/h per year, the same as all of Thailand.
With skyrocketing energy prices, mining cryptocurrencies has become a very expensive activity for both companies and users. This, in turn, has led to a drop in revenue, but also to 130 TW/h, the equivalent of what a country like Argentina spends.
Kazakhstan is primarily responsible for this drop, Dutch economist Alex de Vries tells Quartz, where miners’ margins have plummeted. In terms of greenhouse gas emissions, the crypto winter will reduce the consumption of coal, the main source of energy in this country.
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