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.