The recent collapse of several banks, including Silvergate, Signature Bank, Silicon Valley Bank, Credit Suisse, and First Republic, has raised concerns about the stability of the current financial infrastructure. These events generate skepticism about the policies of quantitative easing and centralized banking, traditionally supported by free-market capitalists and crypto enthusiasts.
One potential outcome of a systemic collapse is an increase in the price of cryptocurrencies and NFT tokens. However, such a development can have grave consequences, necessitating strategic thinking in transitioning from fiat to crypto, selecting the most promising projects and ecosystems.
Within 2 weeks, Silvergate Bank and both Signature Bank and Silicon Valley Bank (SVB) collapsed. The Federal Reserve, the U.S. Treasury Department, and Federal Deposit Insurance Corporation ultimately agreed to insure deposits beyond the initial $250,000 limit in SVB and Signature Bank. This decision, along with the bailouts of other banks, comes at a significant expense, indicating a potential recession.
Furthermore, such events decrease trust in the banking sector, leading to more people withdrawing their money and looking for alternative options. This typical behavior during a bank run has been amplified in the modern era due to the rapid spread of information via social media.
Customer deposits are potentially safe, thanks to organizations like the FDIC, but frustration with banks and their fees has caused many to turn to crypto and Web3 finance, which offer greater flexibility and stability. Web3 solutions provide numerous alternatives to traditional banking infrastructure, with many services managed on a faster and more efficient blockchain. Improved solutions can be developed through collaborations between professionals, analysts, and mathematicians to create innovative, flexible financial systems.
For instance, Stoic AI offers crypto trading bots to manage portfolios without the emotional factor that often accompanies retail investing. The app is connected to Binance or Coinbase via API, ensuring that the funds never leave users’ accounts. This emotionless automation offers benefits at a fraction of the cost of traditional hedge funds while potentially having greater APY rates.
Apart from portfolio management, Web3 options cater to various industries, including crypto lending, collateral, mortgages, house rentals, yield farming, insurance, international finance, microfinance, charitable donations, privacy-based tokens, and others. These solutions typically involve less bureaucracy and increased efficiency compared to centralized banking models.
Even if a systemic crisis is avoided, events pointing to failures in the existing financial infrastructure will likely result in a rise in cryptocurrency prices. This increase is primarily due to central banks printing more money to save commercial banks, which in turn leads to inflation and pushes people towards cryptocurrencies.
Persistent bailouts may ultimately result in a government-dominated state with a poor economic environment, fueling a renewed interest in cryptocurrency products and services. As traditional financial institutions falter, the crypto ecosystem stands to gain increased attention and investment. However, it is essential to weigh the pros and cons before making any financial decisions, bearing in mind the volatile nature of these markets.