TBW #44: New world

Read all about The Big Whale's 44th Premium newsletter.

Hello Whales and welcome to the little newcomers who have just joined us in the Premium edition! There are already over 1,500 of you reading us every week. Thank you so much 😍

To devour this week

🖊️ The editor's editorial
🗣 Our exclusive news
🔶 The "aliens" of crypto
👁 The hype around Aptos


New world 📈

What a surprise! After an incredible (false) suspense of several days, Jerome Powell announced last night that the US Federal Reserve was going to raise rates again, the eighth time since March 2022 😅 , and thus bring them up to the range between 4.5% and 4.75%. You have to go back to 2007, i.e. before the subprime crisis, to find such a level.

To justify this new hike, and those still to come, the most powerful central banker on the planet reiterated the importance of the "fight against inflation", which remains high in the world's leading economy - above 5% on an annual basis. And on this point, how can we prove him wrong?

In the meantime, this environment combining relatively high rates and inflation is a real challenge for the crypto universe, which has built and developed since bitcoin's creation in 2009 in an interest-free world. How will it react? The question is all the more important given that the markets are far from being at their best... 🙁



👉 Web3: the money is still flowing (at least a little)

Yes, you read that right, despite the market downturn and bleak outlook, money is still flowing into the European Web3 ecosystem 🇪🇺. The volumes are obviously much lower than a year ago, but the dynamic is interesting to observe. So is the origin of this new money.

According to our information, in addition to certain venture capital players, it is mainly family offices, structures specialising in wealth management, that are currently putting money into Web3 funds or directly into start-ups in the sector.

"The market has fallen, and so have company valuations. Family offices have realised that now is a good time to position themselves," confirms one banker. One example among many: Web3 start-up studio PyratzLab 🇫🇷 has reportedly raised €3 million, notably from several family offices.


The "Aliens" of crypto

They're under 25, interested in the markets, but use almost exclusively cryptocurrencies and decentralised finance to invest and manage their savings. Why? That's what we set out to find out 🔍

Damien is 22, loves football, his studies, parties, social networks, good music - in short, he has everything the young person of 2023 has. Or almost.

Because Damien has the distinction of owning only cryptocurrencies. "98% of my assets are in cryptos," he tells us. In other words, only 2% of his money is available in euros.

This student from Lyon first became interested in cryptos in 2017, during the previous Bull Market. At the time, bitcoin had risen in less than a year from $1,000 to almost $20,000, and he took advantage of this to enter the market with "a few hundred euros".

Like many investors, he lost a large part of his stake between 2018 and 2019, but he enjoyed runaway success with the rise of the markets during the Covid crisis. Today, at just 22, he owns around €300,000 in cryptos 😅

To give you an idea, that's roughly double the average French household's net worth (€150,000)!

We agree, Damien is obviously not a representative case of young Europeans of his generation; he's a bit of a UFO 👾

Except that "UFOs" like Damien are being seen more and more all over France - and Europe.

Why is there such a phenomenon?

How do these young people invest?

And above all, what impact does it have on traditional finance?

That's what we at The Big Whale wanted to understand 🐳

To do so, we spoke to dozens of young people who have also jumped into the crypto world and are talking more about decentralised finance than life insurance or popular savings books.

Some of them are well known in the ecosystem, others have preferred to remain anonymous.

We also approached banks and fintechs to find out what they think of this new generation and what they are doing, or not doing, to adapt to them and attract them.

But before we go any further, we need to understand what motivates these young people!

The reasons are actually many:

There is obviously the desire to make money 🤑. Like their elders, these investors, who are all aged between 16 and 25, also want to make THE big score and, depending on their ambitions and career path, buy themselves a holiday, pay for their studies, or even "put the daronne (mum, editor's note) to bed" as some say. The pattern is the same, except that the playing field is cryptos.

Until a few months ago, it was possible to find DeFi (decentralised finance) protocols that offered you more than 10% return... monthly! "It's bound to be tempting," laughs Hugo, 23. But it's also very risky. The fall of Terra-Luna and the succession of scandals that followed are the best example of this.

Price and transparency

Besides the financial appeal, young people are also attracted by the crypto universe, which matches their aspirations and seems "simpler" to them.

When we talk about simplicity, it's not in terms of technical use - crypto is still a complicated universe - but in terms of the freedom of decision-making.

"With cryptos, I do what I want with my money. I don't have to give an account or ask my bank for authorisation," explains Noé, who is one of the co-founders of White Loop Capital, a French fund that invests in Web3 projects.

It's also possible to trade at any time of the day or night. "There are no opening hours like there are for traditional financial markets," Simon insists for his part.

Many also stress the importance of transparency in the crypto universe. Thanks to blockchain, everything is traceable, transactions are visible, and there are no hidden fees. "Nothing is free in crypto, but you know what you're paying for, and that's very important," stresses Hugo, who uses DeFi and stablecoins whenever he can to do without euros as much as possible.

"Bank charges are too high for the level of services we get," explains Simon, who still has a bank account because "it's essential" to get paid for his work placement.

How many young people are there in France and Europe? Hundreds of thousands, millions? It's hard to say. What is certain is that their numbers are growing all the time 🚀

According to various studies, including those by the Association for the Development of Digital Assets (Adan), 15% of 18-35 year olds have already bought and sold cryptocurrencies. For the 18-25 age group, this figure could exceed 20% according to some estimates! And the trend is not about to reverse.

For the moment, traditional finance is not too worried about these figures. When questioned, most banks, which did not wish to comment, nevertheless acknowledge the phenomenon.

"Something is happening, that's a certainty," explains one banker, while qualifying: "Does that mean this is the start of a financial revolution?" Not in the short term, obviously.

A risk for banks?

Today, cryptos and DeFi represent just a drop in the financial ocean, and banks' income comes mainly from older categories, especially the over-50s, i.e. those with assets, both financial and property.

But banks would be wrong to underestimate the phenomenon. Because while Damien, Noé and the other young crypto "aliens" are not very numerous today, and especially not very powerful financially, they will grow, and their assets with them... "We're going to have to adapt to this new deal", they admit on the side of a major French bank.

Some players, especially on the fintech side, have already begun to adapt. That's the case with Trade Republic: the German investment app, which claims just over 2 million users in Europe, has recently stepped up the pace on cryptos, in particular to attract this younger generation.

"We want to enable these new investors to go to both the traditional markets, i.e. the equity markets, and also to cryptos," explains Matthias Baccino, head of France at Trade Republic.

Others think that this new generation will end up returning to the "straight and narrow" and gently leave cryptos behind. "You'll see that when it comes to buying a house or preparing for retirement, most will prefer to go to the good old banks because it's more reassuring," laughs one banker.

Is he wrong?

Only the next few years will tell.



Aptos: why the hype?

Launched at the end of 2022 by former engineers from the Diem project (ex-Libra), the Aptos protocol and its APT cryptocurrency are enjoying huge success (+400% in January). We met his team in Paris to try and understand.

The article is available on the The Big Whale website 🐳

This edition was prepared with ❤️ by Raphaël Bloch and Grégory Raymond. The Big Whale is a free and independent media. By supporting us, you are contributing to its development.
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