Rating agency Moody’s recently lowered its outlook for the entire US banking system from “stable” to “negative”. The move comes in light of recent bank failures Silicon Valley Bank, Silvergate Bankand Signature Bankwhich prompted regulators to step in with a rescue plan for affected depositors and institutions.
Despite the downgrade, bank stocks rallied sharply, with the SPDR Bank exchange-traded fund up nearly 6.5% in morning trade, NBC News reported. Moodys reportedly noted that a long period of low rates, combined with pandemic-related fiscal and monetary stimulus, has complicated banking operations. Banks with significant unrealized securities losses and non-retail and uninsured US depositors may still be at risk, according to Moody’s.
Moody’s expects the US economy to slip into recession later this year, which will put further pressure on the financial industry. With the recent Moody’s downgrade, it is clear that traditional banking systems are struggling to cope with the demands and challenges of today’s world. As interest rates rise and the economy enters recession, it is likely that more banks could potentially fail, leaving more depositors vulnerable.
Some cryptocurrency enthusiasts believe that cryptocurrency, especially Bitcoin, was made for a time like this, as its birth was inspired by the financial crisis of 2008. In response to impending financial crises and bankruptcies, The price of Bitcoin rose to its highest level since then June 2022 breaking the $26,000 mark.
Twitter user @luke_broyles shared that this is why more people should adopt Bitcoin:
Guys, have some #Bitcoin and then tell yourself #Bitcoin off the stock exchange.
If banks or investors start seriously considering the possibility of “QE and FDIC infinity” #Bitcoin it is much higher than $25,000 and will never go back down.
— Luke Broyles (@luke_broyles) March 14, 2023
For cryptocurrency enthusiasts, blockchain-based assets like Bitcoin are a great alternative to the declining traditional banking system.
In an interview for Cointelegraph, Trezor Bitcoin analyst Josef Tětek shared that the current spike in the price of Bitcoin appears to be a direct result of the “apparent fragility of the banking system.” Tetek noted that the current banking crisis could potentially push Bitcoin to become a safe haven and risk asset. He pointed out that Bitcoin was created soon after the world faced the financial crisis in 2008 and was “a likely response to the injustice of the bailouts”.
According to Tetek, the recent bank failures clearly show that counterparty risk in the banking system is a “serious problem”, even if it is sometimes well hidden. He said:
“Banks don’t actually hold our money anymore, they lend it and buy volatile assets with it. Depositors are actually creditors of banks. It is understandable that people are looking for alternatives like Bitcoin.”
Related: Bitcoin Price Surpasses $26K As US Inflation Hits 6%
By providing a safer, more transparent and efficient financial system, many tech enthusiasts believe that blockchain-based finance and cryptocurrencies like Bitcoin can play a key role in mitigating the risks of traditional banking and ensuring that individuals 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