Many people are worried about their deposits as a result of the failure of various banks, including Silvergate, Signature Bank
Many people are worried about their deposits as a result of the failure of various banks, including Silvergate, Signature Bank, Silicon Valley Bank, Credit Suisse, and First Republic. They are also doubting the stability of the current financial system. The value of Pac West bank's stock fell by more than 40% last week.
Previously the purview of free-market capitalists and right-wing libertarians, those with a more moderate outlook are now questioning the policies of quantitative easing and centralized banking.
Cryptocurrency and NFT token prices may rise in the event of a systemic collapse, but the consequences may be disastrous. To move from fiat to cryptocurrency in the safest way possible, selecting the finest projects and ecosystems still requires strategic thinking.
The Banking Crisis - An Overview
Silvergate Bank shut its doors in early March 2023. FTX was a major client of Silvergate and it was no real surprise that it ultimately went under, losing over $1 billion in a single quarter after intense customer withdrawals. But it was the start of a chain of banking failures.
The Federal Reserve, the U.S. Treasury Department, and Federal Deposit Insurance Corporation agreed to insure the deposits in excess of $250,000, even though there was no initial insurance for accounts. They also covered Signature Bank, which was taken over by the New York Department of Financial Services. Three major banks - “SSS” - all collapsed within 2 weeks.
On March 19th, another bank failed, this time outside the USA, as Credit Suisse was rescued by UBS. Credit Suisse is a major international bank headquartered in Switzerland. With Credit Suisse, it was a $68 billion bank run on deposits that triggered the collapse.
Decreased Trust In The Banking Sector
The bailouts came at an enormous cost. Guaranteeing deposit insurance at SVB and Signature Bank has cost the Federal Reserve $140 billion. The Swiss state has guaranteed $225 billion to UBS, the institution that took over Credit Suisse. Meanwhile, bank loans are at record highs in the USA. All this indicates a potential recession and severe difficulty in obtaining loans from banks, who will be more reluctant to lend.
Of course, the Federal Deposit Insurance Corporation (FDIC) does quite a lot to reassure people. Customer deposits are safe, possibly even in instances where the bank has no insurance (such as Signature and SVB). But with recent events, alongside customer frustration with banks and their fees, many are still turning to crypto and Web3 finance, which is proving more flexible, and yet more stable.
Alternative Banking Options Via Web3 Solutions
There are multiple alternatives to using the banking infrastructure and many ways to manage your funds. In fact, pretty much anything that can currently be done on the legacy architecture can be done on a faster, safer, more efficient blockchain. Thousands of industry professionals, analysts, and mathematicians can come together to make a more innovative and flexible solution.
Much like Modern Portfolio Theory (MPT) within the capital markets industry, Stoic can tune your portfolio to the risk level you are comfortable with. Current portfolio options include conservative, balanced, and volatile, each containing its own set of strengths. Only the top 30 cryptocurrencies by market cap are traded. All of this is done through emotionless automation at a fraction of the cost of traditional hedge funds and with much greater APY potential.
And this example only applies to portfolio management. There are a plethora of Web3 options that cater to various industries including crypto lending, collateral, mortgages, house rentals, yield farming, insurance, international finance, microfinance, charitable donations, privacy-based tokens, and more. And all of this can generally be achieved with less red tape and more efficiency as compared to the centralized banking model.
All Paths Point To A Crypto Price Increase & Renewed Interest
Ultimately, even if a systemic crisis is averted, it will still result in a rise in cryptocurrency (the price has already risen significantly). This is due to the fact that commercial banks are only being saved with money printed by central banks, resulting in even more inflation, which encourages more people to purchase commodities and cryptocurrencies.
Bailouts can only be done for so long before the system crashes completely as it continually devalues the currency. A “saved” bank comes at a huge cost. This cost is acceptable now and again, but if a multitude of banks has to be propped up, the end result is a government-dominated state with a poor economic climate.
All this can only lead to a renewed interest in cryptocurrency products and services, as existing institutions fail to provide adequate financial safeguards for the population.