Why More Companies Will Begin To Hold Bitcoin Due To Tradfi Uncertainty
The lack of confidence in the Tradfi Markets just got its first taste of 2008
USE CODE: 23SPRING50 DEADLINE MIDNIGHT MARCH 12th
The question we will be asking this week is, what is the real threat to the crypto market and Bitcoin? So far, from many of the analysts we bring on the show often - there is one through line - companies and high net-worth individuals will start the deleverage of traditional banking.
I think we will see more companies hold much more Bitcoin on the Balance Sheet. Long-term planning is going into effect for many startups and early-stage companies. This weekend alone I have had more that twenty of my High Network Investors ask for assistance to move over 400 Million into Bitcoin this week. The concern is simple those with more exposure to 250K of FDIC insured funds simple dont want the expsoure to what could become a major bank issue forcing the Feds hand soon.
Treasury Secretary Janet Yellen said Sunday the government wants to avoid financial "contagion" from Silicon Valley Bank's implosion, but while the US rules out a bailout it reportedly is considering safeguarding all of the fallen institution's deposits.
Regulators on Friday took control of SVB -- a key lender to startups across the United States since the 1980s -- after a huge run on deposits left the medium-sized bank unable to stay afloat on its own.
The Affect On The FIAT System
A bank can face a contagion effect due to the issue of unrealized losses and high exposure to deposits over $250K.
If a bank faces significant unrealized losses on its assets, it may have insufficient capital to cover potential losses or meet regulatory requirements. This can lead to a loss of confidence among depositors, investors, and other stakeholders, which can cause a bank run or a withdrawal of deposits.
In addition, if a bank has a high level of exposure to deposits over $250K, this can increase the risk of a bank run or a loss of confidence if depositors become concerned about the safety of their deposits. This is because deposits over $250K are not insured by the Federal Deposit Insurance Corporation (FDIC), which can cause depositors to withdraw their funds if they are worried about the bank's financial stability.
If a bank faces these issues and cannot address them effectively, it could lead to contagion effects in the broader financial system. Other banks with similar problems may also face a loss of confidence and a potential run on their deposits, which can lead to broader economic impacts and potentially even a financial crisis.
To address these risks, regulators closely monitor banks for issues such as unrealized losses and high exposure to large deposits. They may take actions to intervene and mitigate potential contagion effects if necessary.
Who Buys Them
The Bank of London has submitted an official proposal for the purchase of the UK subsidiary of Silicon Valley Bank, according to a new Reuters report. Moreover, a statement from the bank has verified the formal bid from “a consortium of leading private equity firms,” headed by the Bank of London.
Earlier today, it was unveiled that the FDIC was executing an official auction for the now-closed Silicon Valley Bank. Subsequently, final bids to acquire the financial insinuation were to be proposed by the end of Sunday. Via Watcher Guru
The Bigger Issue
But SVB isn’t the only institution with that issue. US banks were sitting on $620 billion in unrealized losses (assets that have decreased in price but haven’t been sold yet) at the end of 2022, according to the FDIC.
What’s happening: Back when interest rates were near zero, US banks scooped up many Treasuries and bonds. As the Federal Reserve hikes rates to fight inflation, those bonds have declined.
When interest rates rise, newly issued bonds start paying higher rates to investors, making the older bonds with lower rates less attractive and valuable.
The result is that most banks have many unrealized losses on their books. The Tradfi system has finally met a foe that is similar to 2008, be ready for an interesting week ahead.