Recap Of The Banking Collapse (And What It Means For Crypto)

Wow, there’s been a lot happening recently, hasn’t there?

(I feel like I say this a lot!)

In the last few months, we’ve seen PulseChain launch, big action in the Bitcoin and Ethereum price, plus witnessed the collapse of some major US regional banks.

It’s the banking collapse that I’m going to focus on today. Because many in the crypto community are saying it demonstrates exactly why crypto is needed.

Let’s get into it.

A Quick Overview
Silicon Valley Bank (SVB) is a financial institution that provides banking and financing services to startup and technology companies. They recently experienced significant losses due to a number of factors, including interest rate hikes by the Federal Reserve. SVB was forced to sell off investments at a significant loss, which triggered a chain reaction of panic and a bank run where depositors withdrew their funds in large numbers.

The result? The bank was taken over by regulators in early March 2023.

This is the largest US bank failure since the Global Financial Crisis in 2008.

In addition to SVB’s collapse, two other financial institutions, Silvergate and Signature Bank, were also shut down by regulators, and U.S. regional bank stocks plummeted.

What. A. Mess.

What Does This Mean For Crypto?
Well, put it this way, many are saying that this kind of crisis would not be possible in the crypto ecosystem because, as we know, blockchains are decentralised, transparent, and auditable.

Banks are not.

It’s worth noting that Bitcoin emerged as a direct response to the fallout of the 2008 GFC. Its entire reason for existing is to prevent centralisation and give people more control over their own money.

Fifteen years later and here we are facing another crisis. But while the legacy banking systems continue to struggle with the same problems they did 15 years ago, Bitcoin has expanded in both value and capability.

The fragility of the banking system has again been exposed, and more people are beginning to question its reliability.

Does This Mean More Adoption Of Crypto?

When the crisis first erupted, the price of Bitcoin surged. In fact, we saw gains of around 40% in just under two weeks! This tells us that people were potentially viewing cryptocurrencies with fresh eyes, as a viable alternative to traditional banking systems.

The truth is, central banks around the world are printing money like there’s no tomorrow, devaluing currencies and leaving the door wide open for hyperinflation. This is just one of the issues Bitcoin and crypto attempt to resolve.

Bitcoin can’t be ‘printed’ into existence. We know there is a fixed supply and rate of inflation – there will only ever be 21 million Bitcoin in existence.

And we know what happens when increased demand meets limited supply.

I believe we’ll see more traditional financial institutions collapse over the coming years. Which means it’s never been more important to have alternative banking options and a plan B.

I’m reminded of this quote.

“First they ignore you, then they laugh at you, then they fight you. And then you win.”

As crypto investors, our eyes are open to the many problems in the traditional banking system. It seems the rest of the world might be starting to take notice.