The last one week has been a relentless attack on regulated financial institutions. First, Silvergate bank, next SVB and the latest casualty – Signature Bank. All three, regulated by the US financial system but all failed rapidly within a week. What was once seen as very safe haven – your bank account – is now placed under intense scrutiny by thousands of depositors in the U.S.
The intensity and rapid decline of SVB was startling to say the least. In a short span of two days, SVB has experienced a classic bank run leaving the Fed with no choice but to backstop and guarantee all deposits in order to prevent a wider and even greater catastrophe to hit the entire banking sector. The pillars of trust cannot and must not be shaken in the overall financial sector. After all, all moving parts in the financial ecosystem are weaved together by a delicate thread of trust.
History has shown that it does not take a very large financial institution to create systemic panic. The last 2008 financial crisis is a case in point. Lehman, Bear Stearns, etc you get the message.
Going forward, will companies and even retail depositors continue to trust the banking system so as to place all their hard earned cash with it? We suspect not. We believe a small pockets of very smart contrarian and even anti-crypto individuals will begin to look into storing liquid assets in the form of cryptocurrencies. After all, when all these three banks collapsed in the last week, Bitcoin and Ethereum were still being transacted non-stop. There is no central body, no central storage that would “lock up” the funds, etc. The intrinsic value of cryptocurrencies was a juxtaposition to what had gone wrong in the financial system.
Perhaps, this will be a wake up call for many startups and listed companies that now is perhaps the time to really get serious into parking some assets in cryptocurrencies. We believe the moment is inevitable and has finally arrived. These black swan events will herald a new era of cryptocurrency adoption and dominance among companies and startups.
We shall see in the next few months. The price of cryptocurrencies should reflect our theory.
