Moody’s credit rating agency recently downgraded the outlook for the entire US banking system from “stable” to “negative”. The move comes in light of recent bank failures in Silicon Valley Bank, Silvergate Bank and SignatureBankwhich have led regulators to intervene with a rescue plan for depositors and affected entities.
Despite the downgrade, bank stocks rallied, with the SPDR Bank ETF gaining almost 6.5% during morning trading, according to reported NBC News. Moody’s reportedly noted that a prolonged period of low rates combined with pandemic-related fiscal and monetary stimulus have complicated banking operations. According to Moody’s, banks with significant unrealized losses on securities and non-retail, uninsured US depositors may continue to be at risk.
Moody’s expects the US economy to enter a recession later this year, putting further pressure on the financial sector. Given Moody’s recent downgrade, it is clear that traditional banking systems have a hard time coping with the demands and challenges of our world today. As interest rates rise and the economy enters a recession, it is likely that more banks could fail, leaving more depositors vulnerable.
Some cryptocurrency enthusiasts believe that cryptocurrencies, especially Bitcoin, were created for such a time as this was inspired by the 2008 financial crisis. In response to the financial crisis and the collapse of banks, Bitcoin price reached its highest level since June 2022, overcoming the barrier of USD 26,000.
Twitter user “luke_broyles” shared the opinion that this is why more people should adopt Bitcoin:
Folks, get you some #Bitcoin and then get said #Bitcoin off the exchanges.
If banks or investors start seriously considering the possibility of “QE and FDIC infinity” #Bitcoin is going much higher than $25,000 and is never going back down.
Be cautious. https://t.co/dlxtSfpZSE
—Luke Broyles (@luke_broyles) March 14, 2023
Folks, get some Bitcoin and then get said Bitcoin off the exchanges.
If banks or investors start to seriously consider “quantitative easing and FDIC is infinite” Bitcoin will go well beyond $25,000 and never go back down.
For cryptocurrency enthusiasts, blockchain-based assets like Bitcoin are a great alternative to the failing traditional banking system.
In a interview with CointelegraphTrezor Bitcoin analyst Josef Tětek shared that the current sharp rise in the price of Bitcoin seems to be a direct result of the “apparent fragility of the banking system”. Tětek noted that the ongoing banking crisis could potentially see Bitcoin emerge as a risk-free safe haven. He stressed that Bitcoin was created shortly after the world hit the 2008 financial crisis and was “probably a response to the injustice of the bailouts.”
For Tětek, the recent bank failures clearly demonstrate that counterparty risk in the banking system is a “serious problem”, although sometimes it is well hidden. he stated:
“Banks no longer really hold our money, but lend it out and buy volatile assets with it. Depositors are, in effect, creditors to the banks. People are understandably looking for alternatives like Bitcoin.”
By providing a more secure, transparent and efficient financial system, many technology enthusiasts believe that finance based on blockchain and cryptocurrencies like Bitcoin can play a crucial role in mitigating the risks of traditional banking, and ensure that people and businesses have access to the financial services they need.
That’s why it was created! Finally everyone can see why.
—Mark Uretsky (@MarkUretsky) March 13, 2023
That’s why it was created. Finally everyone can see why.
Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information presented here should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
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