Banking crisis: Is it now the hour of cryptocurrencies?
Even after the takeover of CS by UBS, banking crisis keeps the world on its toes. In the USA, the Federal Reserve faces a dilemma: In order not to gamble away its confidence, it must continue to fight inflation. If the central bank raises interest rates again this Wednesday, it threatens to further worsen the precarious situation of struggling regional banks.
In Switzerland, Credit Suisse had to be forcibly merged with UBS - all with the active support of the Swiss National Bank. Both banks are given unrestricted access to the Swiss National Bank's facilities. For Pascal Hügli, bitcoin expert and lecturer on blockchain and cryptoassets at the HWZ, it is clear: "What the current situation brings to our attention: More and more people are just becoming aware that a bank deposit is an unsecured loan tied to a counterparty. From one day to the next, the search for alternatives is once again on - as it was at the beginning of the 2008 financial crisis."
Flight into Bitcoin because of banking crisis?
Pascal Hügli, who in addition to his lecturing activities is now also the owner of Insight DeFi is a content and consulting agency focused on cryptoassets, further notes that at the time, however, cryptocurrencies like Bitcoin did not exist. This has no counterparty risk and can be held independently. However, the digital crypto asset was only created as a possible answer in the wake of the last financial crisis. As the past few days have shown, the narrative of Bitcoin as an alternative seems to be catching on, according to the Bitcoin expert.
For example, since the initial turmoil surrounding Silicon Valley Bank just over a week ago, the cryptoasset has risen in value by over 30% against the US dollar (at the time of publication of this post, it stood at over 25900 francs, albeit with a downward trend, editor's note). Gold has risen in price by about 6% over the similar time frame, while the Swiss franc has weakened against the US dollar. Bitcoin as an escape currency, then?
Investors want alternatives
For Hügli, the reason for the price reaction is as follows: "Bitcoin's strong rise in this short term is probably mainly due to the fact that Bitcoin investors anticipate the end of the interest rate upward cycle due to the circumstances." However, he believes that current events will increasingly legitimize bitcoin investing in the medium to long term. People will want alternatives, and in a digital world, there will be no getting around Bitcoin. Hügli already senses this trend in the first inquiries from family offices and asset managers who contact him these days.
