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- Three of the largest banks in the US faltered in less than a week recently.
With the most recent banking crisis, financial institutions are putting a wide chasm of water between themselves and the cryptocurrency industry. The question that arises here is just how concerned should the sector be about the banks’ evasion. According to some analysts, there are both long- and short-term advantages.
Three of the leading banks in the US—Silvergate, Signature and Silicon Valley—faltered, then fell, in the space of less than a week. Since the financial crisis of 2008, it was the biggest bank crisis to hit the US.
But the crisis had not yet ended. Following the identification of “significant deficiencies” in its financial reporting on March 14, Credit Suisse’s shares crashed, setting off a tumultuous five days for the bank. Finally, UBS, a significant Swiss bank, intervened and decided to buy up its distressed rival.
Bank Indexes on Decline
In the midst of a precipitous decline in European banking equities last week, fears about the global banking industry reappeared. On Friday, shares of Germany’s Deutsche Bank dropped 14% while other financial companies struggled.
Kristalina Georgieva, the director of the International Monetary Fund, has issued a warning that these tremors present a risk to the world economy. She emphasized how debt pressure brought on by rising interest rates has caused “stresses” in developed economies and among lenders.
Georgieva predicts that this year’s global economic growth will be limited to just 3% due to increased borrowing prices, the conflict in Ukraine, and the fallout from the Covid-19 outbreak.
Georgieva on Sunday at a conference in Beijing said that at a time when debt levels are higher, the quick switch from an extended period of low-interest rates to much higher rates is a very necessary step to fight inflation
Blockchain is not an Island
According to some analysts, this banking crisis differs significantly from the one in 2008. A sluggish beast, as it was known. This was before cell phones and mobile banking apps became widely used. The fact that it occurred before Twitter intervened and instantly amplified the feeling may be the most significant aspect.
However, Gabi Kuze, CEO of the Global Digital Asset and Cryptocurrency Association, said in an interview with BeInCrypto that players in the market have acted to mitigate any contagion or related difficulties. He further talked about how in just a few days, they have seen Silicon Valley Bank (SVB), and it is already operating and providing services to consumers. It helps restore some of the system’s lost trust.
He talked about how in the near future, we may have noticed a flight to cryptocurrency, which is unmistakably a move away from the perceived volatility in the traditional financial industry. This is the reason why the price of bitcoin and other digital assets is currently rising, according to Kuze. The cryptocurrency market, in the long run, will profit from these growing pains and will eventually continue to develop, mature, and stabilize.
Kuz thinks that the crypto industry will eventually be subject to regulation, even if it had nothing to do with the failure of SVB, Credit Suisse, and Signature. The closing of Signature Bank, whose board he served on, according to former congressman Barney Frank, was a clear statement.
Bitcoin Might Be Beneficial
Kristi Pldsam, co-founder of Sommelier Finance said that in the long run, these kinds of problems will become outdated. She talked about how we are witnessing the development of new financial railroads where the functionality provided by banks, exchanges, hedge funds, and other financial institutions is made available to anyone with an internet connection, with the added advantages of increased transparency and self-custody of assets.
As more and more of what banks do moves on-chain, the ties between the legacy banking infrastructure and the new financial infrastructure they are constructing on blockchains will change as there is less and less reliance on those institutions.
The majority of the price changes for bitcoin during the crisis have been favorable.
Conclusion
According to Pldsam, there is a chance for established cryptocurrencies like Bitcoin as banking customers seek digital assets as a safe haven. They are, in Pldsam’s opinion, “searching for better choices.”
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
