As banks crumble, Bitcoin believers revel in ‘told-you-so’ moment
He drove a Budget moving van directly in front of the building’s entrance, so all could see the message plastered on the side: “BE YOUR OWN BANK,” it read, between a doctored image of Federal Reserve Chair Jerome Powell holding a “Buy Bitcoin” sign and the orange logo for the original cryptocurrency. A video of the made-for-social-media stunt, set to Pink Floyd’s “Money” as soundtrack, was tweeted by an account with the handle @cryptograffiti.
Following an epically awful 12 months for the cryptocurrency industry, Bitcoin evangelists are enjoying a moment not to mention a huge rally in their favorite coin, which has soared more than 30% in the past seven days, putting the key level of $30,000 in sight. To them, the reverberations from the failure of Silicon Valley Bank only serve to underscore a key vulnerability in the fractional-reserve banking system that Bitcoin was meant to fix: It’s all based on faith that your money will be there when you need it.
As the original white paper proposing Bitcoin put it in the wake of the global financial crisis, the traditional system works well most of the time yet “it still suffers from the inherent weaknesses of the trust-based model.” That weakness went ignored by many in the era of low interest rates, but it’s front and center again now.
“An environment where higher interest rates after a period of hyper-low interest rates are creating bank runs is about as perfect a Bitcoin use-case as one can think,” said Stephane Ouellette, chief executive of FRNT Financial Inc.
It’s true that in the wake of last year’s series of crypto blowups, including the implosion of digital-asset exchange FTX and all the dominos in the crypto-lending space that fell after it, trust in the intermediaries of the digital-asset market is arguably as low, if not lower, than faith in regional banks. Yet nothing at all changed about the rules dictating the growth of Bitcoin supply, a stark contrast to the improvisational and hard-to-predict responses from central banks and governments to the turmoil in traditional banking.
The FUD short for fear, uncertainty and doubt that had long been targeted at crypto by traditional finance is running in the opposite direction now. Yet while the resurfacing of Bitcoin’s origin story has given true believers a “told ya so” moment, it’s not necessarily what drove the coin’s price up during the recent banking chaos. Many in the market believe crypto is rallying not because of fear triggered by the crisis itself, but rather the aggressive response from the government and Federal Reserve that has seen hundreds of billions of dollars added to, or pledged to, the banking system and dramatically shifted the outlook for interest rates.
