Banking Crisis Possible As From Monday

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Last Updated on 6 November 2023 by CryptoTips.eu

Tesla CEO and richest man in the world Elon Musk provided the best summary of the current situation regarding US banks. With a simple meme, he showed an unknown superhero who had to choose between two possible buttons to press. The explanation for the first one was: crypto is fraud, keep your money in banks. The second button of course said: banks are fraudulent, put all your money in crypto.

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Lehman

I remember vividly being glued to the Internet (not unlike today’s Internet) back in September 2008 for every bit of news I could find from Washington and New York that weekend before the fateful 15th. Back then all bank CEOs sat down with the Federal Reserve to find a solution for Lehman Brothers before stock markets would open Monday morning.

In the end, that solution did not materialize and Lehman was allowed to go under. As a result, many banks lost money, a shock went through the global financial system and the American taxpayer had to dig deep into his pockets to bail out the remaining banks over the coming years.

Over here in Europe, the Dutch and Germans paid for the Greeks, Spaniards and Irish who had all borrowed far too much.

The reason was that banks had invested too much money in the global housing market, which turned out to be a real bubble.

Silicon Valley Bank

The news last week that first Silvergate, the bank for the crypto industry in California, and then Silicon Valley Bank, the bank for tech companies in California, both went bankrupt just a few days apart, is now seeping through worldwide media.

We also learn that Greg Becker, the CEO of Silicon Valley Bank sold $3.6 million worth of shares of his own bank about two weeks ago. That $3.6 million would be worthless today, of course, so it’s safe to assume that the bank management probably knew for some time already that they had a problem.

All this also means that many people in Europe will only read about this mess on Sunday and realize on Monday that if a bank in California can go bankrupt, so can one in the Netherlands. In the US you are insured for the first $250,000 in your account, in the EU it is €100,000.

Even the Washington Post yesterday talked about a possible spread of the problem to other banks.

Crypto platform Circle, which had 3 billion in deposits with Silicon Valley bank and also tech company Roku, which kept about 26% of its money with the bank, do not know where they stand. They’ll have to wait for Monday for stock markets to open again to see if other banks are in trouble as well.

Safe

Of course then you wonder: what is still safe? Real estate has not been doing well for several months, inflation is sky-high and unless you buy a very expensive Lamborghini, a car only seems to lose value.

Diversification of your assets seems like the best option to us, and since this is a crypto site, we naturally recommend converting a small portion into digital currencies, even if it’s only 1% or so. Bitcoin and Ethereum may seem very volatile, but just about every financial genius recommends putting a small part of your portfolio in it as well.

Which brings us back to Elon’s meme. What exactly is fraud: banks or crypto. Even Elon doesn’t know right now. We wonder what will happen tomorrow.

Jeroen Kok

Jeroen is one of the lead copywriters on Cryptotips.eu and discusses all recent events in the crypto market. This includes news updates, but also price analyzes and more. He developed his passion for cryptocurrency during the bull run in 2017. He has learned a lot since then. The combination of cryptocurrency and creative writing is perfect for Jeroen and an excellent way to share his knowledge with a wide audience. Find me on LinkedIn / [email protected]
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