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Most crypto firms have been unable to use traditional banking services due to years of regulatory scrutiny. That even as <a href="https://www.blockhead.co/2023/03/20/blockhead-brief-bitcoin-shines-as-banks-fade/" rel="noopener noreferrer nofollow">bitcoin reached its highest level in nine months</a>, adding to the cryptocurrency&#39;s finest week in four years, investors fled the banking sector.As hopes grew that <a href="https://www.blockhead.co/2023/03/20/cash-is-king-but-central-banks-can-walk-and-chew-gum-bofa-svb/" rel="noopener noreferrer nofollow">central banks would reduce the pace of interest rate rises</a>, the largest crypto token soared.Global financial turmoil came to a head last week when UBS Group bought competitor Credit Suisse Group AG over the weekend. As a result, bitcoin jumped 26% last week, its biggest weekly gain since April 2019. In the last 10 days, bitcoin has gone up about 40%, currently standing just about the US$28,000 mark.<img src="https://academy-public.coinmarketcap.com/optimized-uploads/7ce1bc2758cb4c16bcc4560f546e7b5b.png" />Related: <a href="https://www.blockhead.co/2023/03/20/a-wild-week-in-finance-what-happened-and-where-do-we-go-from-here/" rel="noopener noreferrer nofollow">A Wild Week in Finance: What Happened, And Where Do We Go From Here?</a><h2 id="header-0">Growing concerns</h2>On Monday, when UBS finished buying Credit Suisse with help from the government, traditional assets like banking stocks and bonds fell. This was done to try to rebuild trust in a sector that had been hurt.In response to growing worries about the health of the financial system, the top central banks in the world took steps on Sunday to increase the flow of cash around the world.Not since the height of the COVID-19 epidemic has there been such a coordinated international reaction.Tony Sycamore, an analyst at IG Markets, said, &#34;its stunning rally is the result of the banking crisis, and as the interest rate markets price in rate cuts in the second half of 2023.&#34;Sycamore predicts a move towards US$32,000 should bitcoin hold above the key support level of about US$25,000.Some participants in the market had anticipated that central bank initiatives to increase liquidity in the global financial system would be beneficial to bitcoin.As governments and central banks took big steps to boost the economy with money and spending in 2021, the price went up to a new high of US$69,000 in November of that year.A separate <a href="https://www.reutersconnect.com/detail?id&#61;tag%3Areuters.com%2C2023%3Anewsml_KBN2VN088%3A5" rel="noopener noreferrer nofollow">Reuters report</a> shows that the largest cryptocurrency passed the bank stress test.While uncertainty plagues the traditional financial markets, bitcoin has emerged as a potential shelter.Even though a crisis in the banking system is sending the markets into a recession, the notoriously unstable cryptocurrency looks surprisingly strong.In a telling statistic, Bitcoin is up 21% this month while the S&amp;P 500 is down 1.4% and gold is up 8% for the month.Stéphane Ouellette, CEO of digital asset investment platform FRNT Financial, told Reuters, &#34;if you were going to describe an environment where there were successive bank runs because central banks are trying to fight inflation with fast rate increases, that is pretty close to as spot-on a thesis for owning bitcoin as you&#39;ve ever heard.&#34;At least one aspect of Satoshi Nakamoto&#39;s original vision for bitcoin has come true: the cryptocurrency has broken up with equities and bonds in favour of gold&#39;s recent uptrend.<img src="https://academy-public.coinmarketcap.com/optimized-uploads/21130205b3664f2ca4528cfba94afaf0.png" />Ed Hindi, chief investment officer at Tyr Capital in Geneva, told Reuters, &#34;It&#39;s too soon to say that bitcoin has proven the narrative that it&#39;s an alternative in a banking crisis.&#34;But he added: &#34;The rally we are currently witnessing in bitcoin will be looked back at as the point in time where its main property as a decentralized non-sovereign asset was stress tested.&#34;<h2 id="header-1">Alternatives to Banking</h2>The failure of <a href="https://www.blockhead.co/tag/silicon-valley-bank/" rel="noopener noreferrer nofollow">Silicon Valley Bank</a> has messed up the normal operations of many companies, like payroll and bill payment. The closures of Silvergate Capital and Signature Bank have made it impossible to get traditional fiat currency into or out of the country.Dan Matuszewski, co-founder at crypto investment fund CMS Holdings, said, &#34;everybody’s in limbo.&#34;Now crypto startups are considering their options, many of which would further marginalise the business, such as starting a community-run credit union, introducing a blockchain-based solution, or using crypto credit cards.Indeed, venture capital firms are assisting portfolio companies in identifying suitable new banking partners.Once news spread that Circle Internet Finance was moving its business from SVB, where it had deposited $3.3 billion, to Cross River Bank, it became an attractive alternative.David Pakman, managing partner at crypto VC company Coinfund, claimed that due to most banks&#39; unwillingness to engage, others are attempting to take matters into their own hands.He says that the main thing venture capitalists, startup founders, and other people in the crypto community talk about on platforms like Telegram is &#34;we must set up an alternative.&#34;A local credit union that accepts deposits and makes loans is an alternative. A lot of people think that because it wouldn&#39;t be investing like a regular bank, your money would be safer if it were a charity.More investment in blockchain technology is another option to consider. For example, if a cryptocurrency custodian were to partner with a payroll service, stablecoins might be converted into fiat currency and used to pay staff.Pakman affirmed that quality custody does exist in the crypto space, despite what <a href="https://www.blockhead.co/2023/03/21/ftx-collapse-triggers-taiwan-regulation/" rel="noopener noreferrer nofollow">regulators</a> say.This may be too optimistic, though, given that USD Coin was just de-pegged after Circle told SVB about their exposure.Thirdly, you may use corporate credit cards that accept cryptocurrency as payment. Pakman said that investors have been talking to issuers of <a href="https://www.blockhead.co/2023/03/20/mastercard-powers-apacs-first-stablecoin-only-wallet-with-payment-card/" rel="noopener noreferrer nofollow">credit cards</a> offering cryptocurrency incentives to see if they can bring back the feature.Yet, securing financial support is likely to be difficult for any proposed remedy.SVB depositors, including many VC companies that contributed to last year&#39;s record $31 billion in blockchain startup funding, are expected to reduce their risky bets.In addition, according to analytics company PitchBook, fourth-quarter VC financing decreased 75% year over year as a result of the numerous crypto blowups in 2018.Edith Yeung, general partner at Race Capital, said SVB wasn’t &#34;just another mom-and-pop bank around the corner,&#34; but a linchpin in venture investing.The US government has told SVB and Signature Bank customers that their money will be safe and easy to get.Yet there are still many financial obstacles for crypto companies to overcome.Haseeb Qureshi, managing partner at VC firm Dragonfly, said, &#34;It’s a good week for people getting their money back.&#34;&#34;(But) it’s a bad week for crypto banking,&#34; he added.Image: <a href="https://unsplash.com/&#64;kanchanara?utm_source&#61;unsplash&amp;utm_medium&#61;referral&amp;utm_content&#61;creditCopyText" rel="noopener noreferrer nofollow">Kanchanara</a> on <a href="https://unsplash.com/s/photos/bitcoin?utm_source&#61;unsplash&amp;utm_medium&#61;referral&amp;utm_content&#61;creditCopyText" rel="noopener noreferrer nofollow">Unsplash</a>--The world of Web3 can be quite a whirlwind. Whether it’s crypto news in Singapore, South East Asia or even across the globe, we understand how busy the industry is keeping you, so we kindly send out three newsletters each week:<ul><li><a href="https://blockhead.co/tag/blockbeat?ref&#61;blockhead" rel="noopener noreferrer nofollow">BlockBeat</a> for a wrap-up of the week’s digital assets news</li><li><a href="https://blockhead.co/tag/blockhead-brief?ref&#61;blockhead" rel="noopener noreferrer nofollow">Blockhead Brief</a> for weekend happenings as well as what to look forward to in the week ahead</li><li><a href="https://www.blockhead.co/tag/business-bulletin/" rel="noopener noreferrer nofollow">Business Bulletin</a> for macroeconomic updates and industry developments.</li></ul>To avoid FOMO and access member-only features, click <a href="https://www.blockhead.co/#/portal/" rel="noopener noreferrer nofollow">here</a> to subscribe for FREE.

Bitcoin Soars, But Banking Breakdown Leaves Everyone in Limbo

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Alte articole publicate pe 22 mar. 2023

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