Recent bank failures have highlighted the need for Blockchain-based cryptocurrency such as Bitcoin.
Credit rating agency Moody’s has recently downgraded its outlook on the entire United States banking system from “stable” to “negative.” The move comes in light of the recent failures of Silicon Valley Bank, Silvergate Bank and Signature Bank, which has prompted regulators to intervene with a rescue plan for impacted depositors and institutions.
Despite the downgrade, bank stocks rallied strongly, with the SPDR Bank exchange-traded fund rising nearly 6.5% in morning trade, NBC News reported. Moody’s reportedly noted that an extended period of low rates combined with pandemic-related fiscal and monetary stimulus have complicated bank operations. Banks with substantial unrealized securities losses and non-retail and uninsured U.S. depositors may still be at risk, according to Moody’s.
The ratings agency expects the U.S. economy to fall into recession later this year, further pressuring the financial industry. Given the recent downgrade by Moody’s, it is clear that traditional banking systems are struggling to cope 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 potentially fail, leaving more depositors vulnerable.
Some crypto enthusiasts believe that cryptocurrency, especially Bitcoin, was created for a time like this, as its birth was inspired by the 2008 financial crisis. In response to the brewing financial crises and bank collapses, Bitcoin surged to its highest level since June, breaking the $26,000 mark.
Twitter user @luke_broyles shared the opinion that this why more people should adopt Bitcoin:
For crypto enthusiasts, blockchain-based assets such as Bitcoin are a great alternative to the failing traditional banking system.
In an interview with Cointelegraph, Trezor Bitcoin analyst Josef Tětek shared that the current sharp rise of Bitcoin appears to be a direct result of the “apparent fragility of the banking system.” Tětek noted that the current banking crisis could potentially make Bitcoin emerge as a safe haven and risk-off asset. He emphasized that Bitcoin was created soon after the world encountered the financial crisis of 2008 and was “likely a response to the unfairness of bailouts.”
According to Tětek, the recent bank failures clearly show that counter-party risk in the banking system is a “serious problem,” though it is sometimes well hidden. He said:
“Banks no longer actually hold our money, but lend it out and buy volatile assets with it. Depositors are, in fact, the banks’ creditors. Understandably, people are looking for alternatives such as Bitcoin.”
By providing a more secure, transparent, and efficient financial system, many technology enthusiasts believe that blockchain-based finance and cryptocurrencies such as Bitcoin can play a crucial role in mitigating the risks of traditional banking and ensuring that individuals and businesses have access to the financial services they need.