It’s the ugliest banking crisis since 2008…
Over the last eight days, three U.S. banks have collapsed.
Last Wednesday, Silvergate Bank – which had major ties to crypto – said it was shutting its doors. This helped trigger fatal banks runs at Silicon Valley Bank (“SVB”) and Signature Bank.
And even though the Fed stepped in to guarantee deposits, panic has rippled through the regional banking sector.
The chart below shows the iShares Regional Bank ETF (IAT), which tracks the performance of 37 U.S. regional bank stocks.
It’s plunged 43% since the start of the month.
Investors are worried the folks running these banks did the same dumb things their colleagues at SVB and Signature Bank did by taking risks with customer deposits.
And yesterday, shares in the world’s seventh-largest investment bank, Credit Suisse, plunged 24%.
This came after management at the Switzerland-based bank admitted it had found “weakness” in its financial reporting.
But while banks are buckling, bitcoin has been on a tear.
It soared 20% versus the dollar over the past week. And our crypto expert Teeka Tiwari says it will be a huge beneficiary of this turmoil.
As you’ll see below, he expects bitcoin to go much higher – but he’s far from bullish on the broader crypto market. That’s because of an unprecedented crypto panic he sees coming.
I’ll get into that in a moment. First, it’s important to remember bitcoin’s origin story…
Bitcoin was born during the last global banking crisis…
January 3, 2009, to be precise.
That’s four months after Lehman Brothers collapsed and the eye of the storm of the global financial crisis.
As you’ll recall, Wall Street banks loaded up on mortgage debt that went sour. This blew massive holes through their balance sheets. And it led to bank collapses in the U.S. and around the world.
That’s when an anonymous developer called Satoshi Nakamoto released the Genesis Block.
It’s the original “block,” or group of transactions, on the bitcoin blockchain. And Satoshi left a message in its code…
The Times 03/Jan/2009 Chancellor on brink of second bailout for banks
It’s from a headline in the Times of London about the British government’s bank bailouts. (The Chancellor of the Exchequer is Britain’s version of the Treasury Secretary in the U.S.)
Why did Satoshi leave this message in the bitcoin blockchain?
He wanted us to remember the inherent instability of the banking system and present bitcoin as an alternative.
Bitcoin is the world’s first decentralized currency…
Unlike fiat currencies such as the U.S. dollar, the euro, and the yen, it doesn’t rely on a central bank to issue new currency units or referee payments.
Bitcoin also gets rid of the need for commercial banks to look after deposits and facilitate payments.
You can self-custody your bitcoin in a cryptographically secured wallet app on your phone. You can send and receive payments through your wallet, too. There’s no costly – and potentially corrupt – middleman involved.
This is a radical departure from the way the modern banking system works.
As the folks who banked with SVB and Signature Bank found over the weekend, having “money in the bank” is not what it sounds like.
Deposits sit on the liability side of a bank’s balance sheet. If you have $1,000 on deposit in the bank, you have an IOU from the bank for $1,000.
Banks only need to back a fraction of these IOUs with cash. As we saw over the weekend, if too many depositors come for their cash at once, it can trigger a collapse.
But bitcoin ran smoothly while these banks stumbled…
While all hell was breaking lose at SVB and Signature Bank, the bitcoin blockchain settled about 600,000 transactions worth about $33 billion.
And in line with its pre-programmed annual inflation rate of 1.8%, it issued 2,037 new bitcoins.
Nobody lost access to their bitcoins… Nobody tried to call customer service and couldn’t get through… And no regulators had to be called in to back anyone’s bitcoin.
The network chugged along, without a hitch, through the crisis.
So why haven’t more people ditched banks for bitcoin?
First, bitcoin is a relatively new technology. People are used to keeping their money in the bank. Many still don’t trust what bitcoin’s detractors call “magic internet money.”
Also, cryptocurrency is famous for its bone-crunching volatility.
You may be able to access and spend your bitcoin, but you don’t know what it will be worth in dollar terms tomorrow.
Bitcoin reached an all-time high of $67,617 in November 2021. Then it plunged 76% to $15,814… before rising 58% to $24,954.
That kind of volatility can be scary…
But as Teeka has been showing his readers, it’s better than finding your savings have gone up in smoke because your bank did something dumb with your deposits.
As Teeka put it in a video he sent out to his subscribers…
Yes, bitcoin is volatile. Yes, you may wake up one morning with bitcoin down 50%, 60%, 70% versus the dollar. But one, you hold it. Nobody can take it from you. And two, you know that, over time, bitcoin always comes back. You don’t have that risk of losing all your capital, as you do if you put it in an unstable bank.
This is why bitcoin is blasting higher. And it will go higher from here. Right now, it’s above $25,000. I see $30,000 as a chip shot from here.
But that’s bitcoin, the world’s most trusted cryptocurrency. Teeka warns that this is not the right time to buy into the broad crypto market…
That’s because a panic is coming to crypto this month…
And if Teeka is right, it will be a doozy.
He says it will be the biggest crypto panic in the seven years since he first recommended bitcoin to his paid-up subscribers.
What’s going on is so important that Teeka put together a special update to address it.
It’s called The Crypto Panic of 2023… and it’s free to attend next Wednesday, March 22, at 8 p.m. ET.
In this update, Teeka is set to explain exactly what will cause this panic – and how you could turn $1,000 into an entire nest egg…
So make sure to automatically RSVP.
Regards,
 |
Chris Lowe
Editor, The Daily Cut
P.S. You’ll also get access to a special video update from Teeka about the banking crisis and what it means for crypto. Check it out here.