Can Bitcoin Thrive While Traditional Banks Struggle?
For a while, Bitcoin has shifted together with the equity marketplace. During the last couple of years, both of them have sold off and then risen. Several people believe that the price of BTC is increased due to events and the Fed.
Last year, both Bitcoin and S&P were in a similar position with their commodities behaving in a similar way to situations like the CPI prints.
Though, when it was not in the same position it was due to situations like the FTX, Terra, LUNA collapse, etc.
However, things have altered in the past month. BTC was constructed to be a decentralized system that diminished external parties from proceedings.
BTC was formed amid the financial crisis of 2008 and has been assisted by Europe and the United States of America.
US Banking System is Unstable with Backups and Closures
During the past couple of weeks, 3 famous banks in America have collapsed, e.g. Signature Bank, SVB, and Silvergate Bank.
Silicon Valley Bank’s failure is convoluted. Apparently, during the time period of April and December last year, the bank’s CRO did not exist.
Danny Moses is a well-known investor. He said that the collapse was because of terrible risk organizing, not selfish desire.
SVB conveyed that even if it did collapse, it would not need the government’s help. Though because of the circumstances this month, the government had to intervene following the bank being considered important by the Treasury.
Moreover, the failure was also because of the interest rate situation and the opposite worldwide bond marketplace.
Reduced interest rates depicted that SVB had trouble providing returns. For-profits, other banks, and Silicon Valley Bank kept investing money in bonds, i.e. the United States treasuries.
As soon as the interest rates rose, Silicon Valley Bank and competitors were required to sell bonds as depositors had to be given interest.
The relationship between bond prices and interest rates depicted the bonds being sold at a lower price than usual. The continuous losses proved SVB’s failure.
The Signature and Silvergate Banks had similar traits of SVB. They lacked diversification as they were associated with the risks of conventional banks.
The failure of these banks was seen as a prominent one because of the association with crypto. Moreover, Silvergate Bank offered services to the crypto sector with customers like FTX and Circle.
Following the strict observation by US authorities, the bank resulted in stopping operations and liquidating commodities.
Elizabeth Warren, a US Senator, conveyed that since Silvergate was associated with FTX, they were also a part of the scam.
On the other hand, Barney Frank, an ex-Congressman said that the shutting down of the bank did not make sense. He believed the bank’s conditions were improving gradually.
The collapse of a Major Swiss Company
After multiple incidents, it was revealed that the Swiss National Bank will be acquiring Credit Suisse. As per the SNB, it is to maintain financial and economic stability.
The decision was taken by the Swiss government and was not approved by the shareholders the exclusion of any uncertainty.
Last year, Credit Suisse experienced the worst year. The bank was experiencing instability and poor performance.
A week ago they accepted that their bookkeeping was not up to par. Due to the previous collapses, several people withdrew from the bank.
The Swiss bank tried to make things work by providing increased deposit rates but that was not sufficient.
Optimistic Views for BTC
Inflation and currency devaluation might worsen amid quantitative easing following the collapses of banks.
With the value of gold increasing, people think that BTC might have the potential to become the new safeguard.
Bitcoin has gone through bad times, such as during Covid-19, the Russia-Ukraine invasion, etc. However, over the past few weeks, Bitcoin has shown improvement. The market sign is positive.
Let’s see if Bitcoin is prepared to be the safeguard amid the financial instability of conventional banking systems.