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Rising interest rates and a $2 trillion decline in US banking system assets' market value have increased many banks' fragility. More than 186 of them are at risk of collapse, according to an analysis by Silicon Valley Bank (SVB). The study points out that a combination of losses, unsecured leverage and large loan portfolios could lead to the collapse of these banks.
The analysis showed that if only half of the people with unsecured deposits decided to take their money out of the bank, nearly 190 banks could face problems repaying their secured deposits. Some $300 billion could be at risk because of this.
The central bank's policy may have a negative impact on long-term investments such as government bonds and mortgages, causing losses for banks. A bank is deemed unable to repay its debts if the value of its assets, after paying people with unsecured deposits, is insufficient to cover all the secured deposits.
The collapse of three US banks reminded the fragility of the traditional financial system. This has led to the allocation of more investment deposits into cryptocurrency assets. The crypto community claims that Bitcoin was founded for exactly similar situations.
The Federal Reserve's response to the banking crisis has led to a spike in Bitcoin prices, with some experts believing the trend will continue as the market responds to the Fed's actions.
Bitcoin reached a new nine-month high of $28,469 on March 19, fueled by the ongoing US banking crisis and the Federal Reserve's injection of nearly $300 billion into the economy.
Bitcoin's surge followed a strong performance by US equities the day prior. Some analysts predict that the crypto's uptrend could continue despite sideways stock movement. They also discussed the potential consequences of the Fed's current behaviour and argued that Bitcoin is a reliable haven compared to stocks.
In summary, Bitcoin and cryptocurrencies continue to represent significant investment potential. Many experts suggest that cryptocurrencies like bitcoin could become an important source of investment for people who want to protect their wealth from inflation. Currently, there are many ways to invest in cryptocurrencies however, the easiest one is to use our trusted WEXO App.
According to recent reports, Coinbase is in discussion with its key clients to set up a company outside the US. All of this is taking place while some US lawmakers and authorities criticize cryptocurrency companies, believing that they are complicit in the issues that US banks are currently facing.
U.S. supervisors, including the agency that oversees stock trading, have taken on several cryptocurrency companies in recent months. For example, the firm Kraken has been criticised for its cryptocurrency staking services in the US. However, despite the problems, Coinbase notified its users in March that their investment program would continue, and perhaps even increase.
The new Coinbase project is expected to provide services to customers all over the world, but it is not yet known where exactly it will be based.