• The collapse of two US banks, Silicon Valley Bank and Signature Bank, has led to a discussion about secure investment tools and the fractional reserve banking system.
• Bitcoin, Ethereum and BNB have gained over 7 percent in the past 24 hours as investors scramble for more secure investments.
• A $25 billion bailout by the United States federal government has raised questions about liquidity and inflation rates.
Banking Crisis Looms: Is Crypto The Future Of Secure Investing?
The collapse of two of the top United States banks, Silicon Valley Bank and Signature Bank, has been considered a bullish thesis for Bitcoin and other leading digital assets. Investors are scrambling to find more secure investment options as these digital assets have gained over 7 percent in the past 24 hours.
Fractional Reserve Banking System
The $25 billion bailout by the United States federal government has caused many investors to question the fractional reserve banking system that requires lenders to maintain only a small portion of deposits available for withdrawal while the rest are lent out to fuel economic activity. All banks around the world operate this way which could lead to higher inflation if bank runs occur at an unprecedented rate.
Bitcoin To The Moon?
Michael Casey, author of ‚The Age of Cryptocurrency‘, believes that a situation similar to the 2012–2013 Cypriot financial crisis could be unfolding again. He indicated that when Cyprus bank failed in 2013 it fueled Bitcoin’s rally which may be happening now with BTC’s bounce over $20,000.
Liquidity Issue
„In theory, the collapse of Silicon Valley Bank is highly bullish for #Bitcoin“ said @KobeissiLetter on Twitter. „Bitcoin literally fixes the fractional reserve issue.“ However, this sentiment can hardly rally 2% now because “the real problem is liquidity” according to @KobeissiLetter. Liquidity was already bad before SVB but now it’s gone.
Conclusion
Investors are looking for alternative investments such as Bitcoin due to fears about liquidity issues and potential inflation rates from loan defaults during a banking crisis like 2008 or worse than what happened in Cyprus in 2013. This could be fueling Bitcoin’s recent rise above $20k but only time will tell how long this trend will last.
