“Qui a dit quoi?” is a series of articles launched by Coin24 with the aim of interviewing French-speaking actors in the world of crypto-currency and blockchain to enlighten you on concepts or present solutions or products related to this industry full of future.
To find all the “Who said what?” articles, click here.
Who is Thomas Andrieu?
Born in 2003 in Toulouse, Thomas Andrieu is the author and co-author of numerous books. He has participated to date in the writing of several hundred articles on crypto-currencies, trading and economics for various media including OR.FR, Cafedelabourse, Youtrading, the RocheGrup fund… He is now starting to co-write a book on crypto-currencies. One of the first economic and financial minor authors, Thomas Andrieu is first of all a passionate of economy and finance. He pursues his personal and academic studies in the field. In addition, he attaches great importance to the cyclical understanding of markets and the economy. His studies and other publications are also available on his website.
Do you think crypto-currencies are currencies?
Thomas explains to me that few people know the theoretical origin of crypto-currencies, yet everything has already been theorized.
In 1976, Friedrich Hayek published his book “Denationalisation of money”. In the introduction, he states that “the suggestion that the government should be deprived of its monopoly of issuing money opened up the most fascinating theoretical perspectives and showed the possibility of arrangements that had never been considered”.
His book thus formalized the theory of monetary competition, in which the monetary system would be a confrontation of private currencies, the most unstable of which would be pushed out of the market.
Many economists see crypto-currencies as denying the principle of money altogether. Their arguments are not wrong, but the reality is far more mixed.
Precious metals ousted cattle and grain as a means of payment nearly 1,500 years ago, giving monetary supremacy to the state. Then we had the appearance of banknotes, almost 1,000 years ago. Then the invention of the printing press and the emergence of the first joint-stock companies made banknotes indispensable, which led to the creation of central banks.
Today we have central banks that are theoretically detached from the state, and are in charge of monetary stability.
In short, the monetary system evolves with major innovations and economic development, probably towards a permanent decentralization of the means of exchange. To put it plainly, crypto-currenciesaies are closer to a monetary innovation than to a traditional form of money.
Which tokens come closest to this definition?
For Thomas, the best compromise between traditional currencies and crypto-currencies is probably stablecoins, which central banks have understood the dangers to their sovereignty. The only thing we know for sure at this point, Thomas tells me, is that crypto-currencies are a contemporary (inevitable) adaptation of money to the great innovation of our time: digital, and that crypto-currencies are simply a historical reality.
Do you think Bitcoin is like digital gold?
In fact, the statistical and economic reality shows that gold and Bitcoin are two quite different things stresses Thomas. He explains that Bitcoin is 3.5 times more volatile than gold and that Bitcoin is not highly correlated to gold. He also points out that the capitalization of all crypto-currencies remains nearly 6 times lower than that of global physical gold.
Furthermore, the market structure is inverse on both assets. The influence of miners on Bitcoin is decreasing over time. While Bitcoin miners weighed nearly 90% of the supply in 2010, it’s less than 10% today. Conversely, over 80% of the supply of physical gold is provided by mining companies, making it a scarce asset. The only commonality remains the desire of many investors to avoid traditional currencies in both cases. Bitcoin reacts quite strongly to volatility crises, while gold will react more strongly to rates, which also determine volatility. The correlation between gold and Bitcoin is therefore complex in nature with time and intensity patterns that also follow similar laws to other markets.
How are crypto-currencies adapting to the economic readjustments we are seeing?
As some of our reader-investors may have noticed, crypto-currencies are very fond of periods of low volatility, which often follow currency crises or tensions Thomas points out.
Crypto-currencies fell sharply after 2017 as monetary tensions among institutions were growing (Quantitative Tightening by the FED). The COVID crisis propelled the markets into an unprecedented bath of liquidity – liquidity that is expected to remain abundant for a few more decades.
Paradoxically, the statistical data shows that the role of central banks in the recent crypto-currency rally is prominent. The main sensitivity of the crypto-currency price is risk sensitivity, which in turn is determined by rates, i.e. central banks.
So we can look at the overall evolution of crypto-currencies in relation to crisis (volatility) cycles and monetary cycles (rates, real rates, spread between long and short rates, deficits, etc…). I think this is the real key to reading the crypto-currency market, always remembering that it is now integratedto the global financial system.
Who said what? With Thomas Andrieu – The final word
In closing, I ask Thomas if he thinks the crypto-currency market is suitable for beginners and if he has any tips to share with our readers.
The crypto-currency market attracts many investment beginners. In 2015, more than half of crypto-currency users were young people between the ages of 15 and 35. Today, the gap between crypto-currency users is considerable. Colossal institutional players are positioning themselves next to rather young and novice individuals, the middle ground is hardly noticeable.
In fact, 91% of addresses (between 0 and 0.1 Bitcoin) concentrate just over 1.25% of the number of Bitcoins held on the market. Conversely, holders of more than 1,000 BTC (0.0055% of users) concentrate more than 42% of the market capitalization.
So the first piece of advice is to look at the long term trend based on the institutional position.
The second advice is probably to avoid trading on too short periods for less experienced people and to avoid reacting emotionally (example of FOMO – Fear Of Missing Out).
Finally, the crypto-currency market has many scams, so you have to remain very vigilant and focus on the big crypto-currencies (the top 100 for example). Indeed, almost all of the 10,000 crypto-currencies currently listed have a very low capitalization and suffer considerable risks.
Thanks to Thomas Andrieu for participating in this “Who said What” edition!