After an accelerated growth between 2019 and 2021, the crypto industry suffers from the exit of US$ 2.1 billion from the market since November 2021, a phenomenon that, for the CEO and co-founder of the Argentine platform Buenbit, Federico Ogue, will mark ” a consolidation of companies, in which the smaller ones will disappear”.
It is part -he assured- of the abrupt cycles of market growth and decline in a market that is little more than 10 years old and that, although “It is the first time that a macro crisis coincides with a crypto crash”will help “purify the projects most linked to fashion or speculative, and that those that generate value survive”.
Currently there are more than 20 platforms for buying or exchanging cryptocurrencies in Argentinaa sector that grew to the beat of new users that, according to different estimates, covers more than 1 in 10 Argentines, the majority attracted by the adoption of “stablecoins”, cryptos that follow the price of the dollar, from 2020 onwards .
“The value that crypto can give to overcome the economic problems we have in Argentina is very strong, that’s why there are so many companies that think about how to help people,” Ogue said in an interview with Télam, in which he evaluated the news of this industry and the possibilities that blockchain technology can bring to non-traditional financial solutions.
The Bitcointhe world’s leading cryptocurrency, lit sold for $69,000 in November of last year, but last weekend it was worth less than 18,000, a 75% drop in just eight months and its lowest price since 2020.
“Crypto lives in cycles and, more or less, the same thing always happens: In the bullish cycle, prices rise and projects begin to appear that make people interested. As much as the incentive is not the right or the most noble, speculation generates traction for the industry, which facilitates the penetration and adoption of crypto,” Ogue noted.
Although this time the cryptocurrencies fell along with the rest of the assets considered risky in the world – shares or debt bonds of peripheral countries – due to fear of a global recession, there were not a few crises that have been experienced in recent weeks. in the sector.
Beginnings of May one of the ten largest crypto projects in the world, Earth, collapsed in just three days, making almost US$ 50,000 million disappear.
weeks later, Celcius, one of the largest staking platforms in the world -a mechanism of loans and deposits in exchange for interest- suspended the withdrawals of its users for not having the deposits, a kind of “crypto corralito” that continues to this day.
“When things like this happen, problems start to come from everywhere. Crises like these teach a lot to be even more careful in communication, education and transparency. People think only of earning money, but when these things happen, it is what they value the most,” he asserted.
Is that doubts about the security of finance platforms and the skid of these projects are key in the panic that flooded the cryptocurrency market in recent months
“There are many projects that are bad, that do not have a fundamental value and that are more linked to a speculative issue or a short-term fad. The good thing about these declines is that they are filtered out and what really generates value remains” , said the CEO of Buenbit.
In this sense, he assured that Bitcoin and other cryptocurrencies “are new assets” as bring to blockchain technology and, with it, “a new infrastructure to do a lot of things.”
“The important thing is always to try to see the fundamental value and take out what distracts,” he said.
Although the transmission channels of crypto with the real economy are very low, episodes such as those of Terra or Celcius raised questions about whether the lack of regulations could cause a crisis similar to that of 2008, when the bankruptcy of the Lehman Brothers bank triggered the mortgage crisis that caused the entire market to crash.
“As an industry we cannot escape systemic risk because it exists in all systems. We must try to mitigate it by being prudent with rules and transparency, but there are players who have darker practices and who, because they are highly leveraged, cause falls in the form of dominoes,” Ogue pointed out.
And he added: “It goes from the euphoria in which when it goes up everything is fine, but when it falls everything is wrong, people are afraid, believe in all the conspiracy theories and a vicious cycle and a self-fulfilling prophecy can be generated ” .
The combination of the collapse of prices and doubts about the stability of the system put in check the profitability of the business model of the entire industry.
“Surely there is consolidation and companies that come together and smaller companies will disappearas it happened in all the cycles,” Ogue assured.
Buenbit was one of the first companies in the crypto or fintech industry in announcing a worker cutback of about 50% of its staff in May, to stay on its feet for the next few years, in which it will be much more difficult to obtain financing.
Ogue assured that made the decision to maintain the self-sustainability of the company, because they saw that “it wasn’t just crypto, but the macro situation” and that, in the end, “it was the best thing to have done it before because we managed to get all the people who left to find a job.”
“We ate the blow of being the first, that’s why we went out everywhere. But it was a very difficult decision. I think that for those who matter it was better to have done it sooner than later,” he said.
Still, the so-called “crypto winter” did not significantly affect the total value of deposits on the platform, which was down “about 15%, which was low compared to everything that happened,” he said.
Loans in pesos guaranteed with stablecoins, the new use case that crypto brings
Use stable currencies (stablecoins) as collateral to request a loan in pesos it is a new use case that cryptocurrencies bring, a mechanism that allows to reduce the cost of granting to a minimum and what are you looking for compete with traditional financing instruments of consumption among crypto users.
Unlike personal loans granted by banks or non-bank financial entities, collateralized loans in crypto they use smart contract technology to mitigate the risk of bad debts.
The first experience of this type in Argentina the company Buenbit will begin to offer it to its users from next July, although at the moment it is in a testing stage to verify its correct operation.
“We want more crypto to be used on a day-to-day basis. But what happens with crypto is that people keep it and take it out of circulation, the same thing that happens with dollars,” he told Télam Federico Ogue, CEO of BUenbit
“The collateralized loan solution is, precisely, a way to grab your savings and, through loans, have money to use on a day-to-day basis without parting with them. At the same time, the DAI that you leave as collateral continues to leave returns. It is something that does not exist in the market today,” said Ogue.
He added: “That’s what we want to do with crypto, that the savings have an impact on the day to day and that they generate economic activity”.
The loan works as follows: stable coins are left (DAI, a stablecoin that follows the value of the dollar) collateral and a loan of a volume lower than the value of the backing crypto (80%) is granted.
This allows the tloan handle is much cheaper since, in case the debt exceeds 90% of the support, the support is automatically sold and the credit is cancelled.
To understand it with an example: if a person wanted to take out a loan of this type for $80,000, they should leave a guarantee for $100,000 in DAI as payment guarantee. He could repay that money whenever he wants, as long as his debt does not exceed 90% of the support provided by his guarantee as it increases due to interest.
“There are no deadlines or return fees. You can cancel it the minute you ask for it or let it run to infinity. As long as the collateral and loan ratio is maintained, it can be left open. If the dollar follows inflation, your collateral always goes up and can equal or even exceed your loan,” Ogue explained.
The interest rate with which, at the moment, Buenbit loans would come out to compete is 58% of the Annual Nominal Rate that, by compounding interest daily, would leave a Total Financial Cost (CFT) close to 79% per yearsince all administrative costs are included in these rates.
This is a very competitive rate for a market in which, currently, a personal loan in a bank has a CFT that varies between 100% or 140%, depending on the client, while in a credit fintech is usually demanded more than 200%.
The loan is received in nuARS, a stablecoin that follows the value of the Argentine peso developed by Number Finance, it works about the Binance blockchain (BNB Chain) and that it has a mixed collateralization mechanism: they can be issued through loans collateralized by stable cryptocurrencies that follow the dollar, or they can be bought with pesos or other cryptocurrencies.
