Banks vs Bitcoin: Where Is The Money?
Since Mr. Nakomoto first warned about the flaws of financial and banking systems over a decade ago and offered a better alternative, it was this month when Satoshi finally had "I told you so!" moment. That is if the creator of Bitcoin wanted to take a credit. Back when the global financial crisis was still unfolding, it wasn't too difficult to see how broken the system was, how bankers didn't care about the consequences of gambling with people's money, how politicians and bankers were colluding. As time goes by, the economic cycles repeat, and not all the wrongdoings are simply forgotten. As it was one time event, and wasn't going to happen again. Everything goes back to business as usual.
It wasn't going to be business as usual this time. This time, there was an alternative. A better alternative - Bitcoin. While the idea of decentralized money with immutable protocol was embraced by some. It wasn't welcome by those of leaning towards more traditional ways of conducting financial transaction. And for most of the public it was going to have learning curve of years to even get started in understanding what money is, and what it can be anything we call money.
Alternative is not necessarily a replacement. Replacements are usually done by centralized entities who dictate what legal tender is and put in place monetary policies. In some countries we have seen how politicians choose to replace the old currency with a new, because the were too many zeros on the bills which didn't represent much of a value. Now that is a replacement. It doesn't leave a freedom to choose. Take it or leave it. Alternative on the other hand, leave the freedom of choice up to the people. They can decide on their own this alternative can be beneficial to them at all.
Alternatives are never a threat. In fact they are the driving force of free market. If a company makes a product without a competition, and is profitable, in a free market chances are alternative products would emerge. This should encourage ambitions to deliver better goods, better services, and motivate to innovate. However, monopolies do not like alternatives and/or competition. They prefer to have none. Even in free market we see how bigger corporations simply buy out smaller innovators, or make is difficult for them to exist in the market.
Same is true about money. Money has a been a monopoly for a very long time now. US Dollar as a global reserve currency has dominated most if not all global financial transactions. Bankers have been in charge of this monopoly, in the leadership of Federal Reserve. Of course this monopoly is only possible in the presence of collusion with politicians. Politicians also have a lot to gain in this deal. It is all great and beautiful when things go well, economy grows, people are happy. However, the system is not designed for continuous growth. It programmed to crash every now and then. Usually, these financial problem may be preventable, but that would require to redesign the system which may not favor those who control it.
What we have seen last few weeks in how banks were collapsing or failing, is something we have already known for a while. Banks don't have enough money to pay their depositors back. They are not designed to keep all depositors' money safe, readily available when claimed. Nor are they held accountable for inability to deliver depositors' money when asked. The system encourages them to "gamble" with the money they don't even own.
This gambling behavior often characterized as investing and utilizing passive assets. Double standards are very obvious, when we consider the take of regulatory agencies and governments regarding stable coins. Almost everybody agrees if stable coin claims to be backed a fiat (USD), the minting or managing entity must have exact amount of fiat in reserves to back the stable coins in circulation. That sounds like reasonable ask. However, there isn't always clarity if certain entities do have full reserves of fiat to back the coins. I also agree, they must have the exact amount available. It makes sense. Why is this standard not implemented with banks. If depositors park their money in bank for some time, shouldn't all funds be available in reserves? Apparently not. It seems it is ok for banks to invest the money. And when big number of customers start to withdraw, they have no money available and collapse.
But wait, there is FDIC insurance for all depositors. It only covers $250K. That's a lot of money. It should easily cover an average bank customer, no? Why are they even keeping this much money in cash anyway? Shame on them for not investing, may the bankers think. When I saw in the news that Roku had almost half a billion dollars in Silicon Valley Bank, when it was announced that SVB was collapsing, it did look that was a lot of money to lose without ability to recover with FDIC insurance. Roku wasn't the only company that was about to lost a lot of money. There were many more companies that used SVB. Obviously there was a panic. Now because of banks failing in properly storing customer funds, companies were going to fail as well.
Then something interesting happened. US Treasury along with Fed decided to bail SVB and other failing banks out. They said, all depositor funds are safe, and they should be able to withdraw without any issues. All of the sudden, although not written in the laws, FDIC insurance coverage went from $250K to millions and billions. It's ok, your funds are safe. We can print more, you know.
I am not for financial or economic instabilities at all. I hope we done with negative news and future is better. We did come really close to the domino effect of bank failures. The question is was the crisis averted or delayed? Has the confidence in banks been restored? I think not. Now my deposits won't cause any crisis. Average people's money probably won't either. Thinking about thousands of companies having millions and billions at risk though is concerning. That is way too much money, and I am certain banks can't cover them all even with bail outs.
The issue at hand is not that banks are useless, inefficient, or incompetent. Banks do provide useful services for people and companies store their funds and engage in financial transactions. They are essential parts of the economy. Banks are competent. They have been around for a long time, and have developed systems that proven to work. They are efficient as well. Yes, some banks still use old computers and tech, but they still do work. The issue is the system, that allows bankers to gamble/invest with customer funds.
Some will say that the bonds SVB have bought was the safest investment. Investments are always risky. Markets are not predictable. Feds actions are even less predictable. Either way, it wasn't their money to gamble with. Why take such risks? Because system allows. Not only it allows it, it encourages such behavior. There is no such thing as passive assets. Money should be locked up in vaults. It should be invested to accumulate more and more money. That's how they think. That's what they do.
Interesting hypocrisy we can observe here if we compare the SVB collapse and FTX collapse. In essence, both are guilty of the same crimes. Both entities gambles with depositor funds, in hopes to make themselves rich and hopefully return customer funds before they find out. When gambles or investments didn't work out, what to do? There is no money cover the funds. FTX is declared fraud and its founder is under criminal trial. SVB, which did the same exact thing is bailed out by the most powerful financial institutions in the world, and the entire drama is downplayed as a bad investment in a wrong time. Isn't that amazing.
We already knew that banks, insurance companies, financial institutions do not have money to cover customer funds. If everybody were to withdraw at the same time, they would all collapse. But this was sort of imaginary fiction in our minds. Of course, this wouldn't happen to our money, right? It can, and it did. There was a bail out this time. Can bail out help next time.
Speaking of bail outs, what is really interesting is this time Congress and lawmakers had nothing to do with it. Usually, such things would have to go through long political debates, negotiations, and at the end they all would come to an agreement to bail out "too big to fail" entities. This time, none of that was needed. It just took a weekend for all colluding parties to get together and come up with the plan to pay, even if FDIC doesn't cover them.
This was a wake up call for many, especially for businesses with decent amounts of cash in their banks. Now, they all know that their funds are not safe in no bank. At the very least, this should make CEOs, CFOs, and financial managers to consider the alternatives. The number one alternative is Bitcoin. This would never happen with Bitcoin. Moving their cash into bitcoin would provide full ownership of their money, and won't let anybody else gamble with it. Moreover, this could be the biggest investment they have made themselves. Easy said than done. There are other obstacles for companies to make such moves. Not everybody is a Michael Saylor. If anything, what Mr. Saylor has done should be a motivation and inspiration for these financial professionals. There is a blueprint how to move away from banks and to bitcoin. And such moves do not have to be all and sudden. Bitcoin can even be a monetary strategy for a company as a hedge, insurance, or even a diversification.
The game has started. It is time for companies to decide, where their money is. Is it in banks that may one day collapse, or is it locked up in bitcoin vaults in cyber space? Let me know your thoughts in the comments.
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it looks like the money is not safe anywhere, even if you are keeping them in banks or in exchanges. risk is everywhere. Kind of worried from all the mess around. you can't even do anything what if Binance will collapse all of sudden? (even though that is not going to happen still anything can be done). we've seen a lot in past, dont have to go that far. Sure banks and other companies have invested their money in crypto but still, the risk is everywhere.
thanks for the post.
The point is with decentralized money like bitcoin, we have an option for self-custody. That is safe, as long as we don't lose the private keys.
Yes absolutely! Alternatives are not a threat and we all need to deal with negative news and sometimes rumors and future is better.
Its true that some passive income source are like gambling and people become crazy to make money anyway.
You discussion bring a lots of things we have in our mind and there is no chance to disagree with any point that you’ve mentioned logically.
Thanks!
I appreciate your insight on the flaws of the current financial and banking systems, and your belief in the potential of Bitcoin as an alternative. It takes courage to challenge the status quo and to consider new ideas that may not be accepted by everyone. You have articulated your thoughts very well and have shown a deep understanding of the intricacies of the financial world. Your point about alternatives driving innovation and competition is spot on, and it's important that people have the freedom to choose what they want to do with their money. Keep up the good work of exploring new ideas and sharing your thoughts with others.
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Thank you!
That is the fact when there is a better alternative than the existing powerful entity putting everything to dominate or destroy. And currently, the collapse of the banking system is revealing the naked scenario of the system. If the individual funds are printed 10 times to run their own system then how the security can be provided which has also happened for the FTX and related entities collapses? That's why Robert Kiyosaki always tells that real money is the debt that must be revised to protect the existing system but they don't want that to keep their empire esteemed. Thanks for sharing such important facts!
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It takes courage to challenge the status quo and to consider new ideas that may not be accepted by everyone. but risk is everywhere. Alternatives are not a threat and we all need to deal with negative news and sometimes rumors and future is better.😎
The further bitcoin can get away from banks again the better! Only real issue with that is it's a double edge sword and you'd most likely have a smaller market cap without banks. Makes you wonder if we are just doomed to use banks or if crypto will find a way.
I think both can co-exist. Banking infrastructure and know-how that has been developed over decades will continue to be useful. But the system of how they operate may have to adjust.
Only thing that is keeping banks from offering bitcoin or crypto services is probably the laws and regulations. Their answer for crypto demand seems like CBDCs. But that doesn't really solve any problems within the system.
Are you a BTC maxi? Or do you leave room for other crypto like ETH too?
No. I would call myself Bitcoin First. I hodl btc, ltc, eth, hive, koin, and others as well.
I am for any decentralized networks that offer solutions or alternatives. Bitcoin is the first one.
Bitcoin solves money, Ethereum solves smart contracts, Hive solves web3 and social networks, etc.
They all serve a purpose and don't necessarily compete with each other.
Great answer. I also think like you, although techno speaking I prefer eth and hive, for the same reasons as you. In terms of btc I don't see any inovations. But as a value holder it's ok I guess.
If another “2009 financial crisis” will happen, it will be good change for #crypto currencies.
I hope it doesn't happen.I doubt it will be good for anybody. Rich will get bailed out, poor will lose more. But you are right those who considered bitcoin or other decentralized coins may get hurt less.
I hope also it doesn’t happen🙏🏻
Sometimes, I find myself wondering what "safe" even means, anymore.
We do have a bit of a conundrum to deal with, as far as I can see. On one hand many "hope" that BTC/crypto gains more mainstream acceptance, but on the other... the more mainstream we become, the more intertwined with the legacy financial system we become. It's not like there's a snowstorm of "we accept crypto" stickers going up on the windows of Starbucks and McDonalds... meaning, that people are still paying for everyday things with fiat, which almost invariably means there has to be some kind of intermediary between crypto and fiat, even if any give person purports to love crypto.
Even if you have a crypto-based debit card, it still has to move between your (for example) Hive and USD or EUR. Wish it were otherwise, but for now it isn't.
Meanwhile, I wonder whether anything will come of the rumors that Coinbase and a couple of other (centralized, I grant you) exchanges will be getting into the banking business.
=^..^=
In El Salvador, there are plenty of "we accept Bitcon" signs at shops, and that's just the beginning. Adoption will skyrocket when the house of cards fiat system finally topples.
El Salvador is definitely a very cool "test case." But having the government declare "Bitcoin is legal tender now!" and gradual *"organic" adoption are difficult to compare. Imagine if the USA government said "Bitcoin is legal tender!" THAT would cause enormous shifts in everything economics...
=^..^=
The largest nations will be the last to adopt crypto, if they even exist in the future. It starts first with smaller nations and states within the bigger countries.
I would say that i have about 80% of crypto in my wallets. The rest is in dex, as its convenient for trading. If i forget the password, then no one to blame but myself. Its much better to keep your own keys than relying on the crypto exchange. So i just use the minimum there !
Interest rates keep raising, more banks go bust. Eventually everyone gets bailed out with digital monopoly money, under the condition that it can only be spent on certain items, by a certain expiry date.
I think there are advantages and disadvantages to everything but I think it ends up coming down to control. The banks control the current financial system and I doubt they would ever want to give that up because it gives them an advantage. At the same time, I just don't think crypto is stable enough to take the place because most things are priced in fiat to most people in the world. Just having assets isn't enough and that was taught by the banks because you need to have liquidity. SVB had that same issue
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Muy interesante. Creo que sería bueno contar otras criptomonedas y la forma en que Bitcoin se relaciona con ellas, para poder existir en esta batalla.
Gracias por compartir.
Indeed, the current Banking crisis finally exposes the banks' mismanagement and an end to putting all blame to crypto.
The comparison between SVB and FTX was a light bulb moment for me. Why and how did the FDIC suddenly insured all that money? I think they have delayed again the collapse of the financial system like they always do. I'm all in for alternatives especially when the legacy system is in shambles.
While FDIC was in the room when they collaborated on solutions, it wasn't necessarily FDIC insurance paying, but rather they created a some sort of Fed entity/process where banks at risk could borrow money or convert their bonds into cash. This way all depositors would be able to withdraw their money.
Thanks for the clarification. I understand it much better now.
Very, very good! You did well to remind us all why Bitcoin was born. Inside the blockchain there is a value, inside the banks instead I start to doubt !LUV
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I could not reconcile the public knowledge and seeming denial of this crime. Is this an indication of helplessness on the part of the majority?
Yes, you're right that alternatives threaten monopolies, and monopolies can only make it difficult for competition to exist through political connections.
I love the way you expand this idea of alternatives and apply it to Bitcoin as a way for CEOs and CFOs to protect their companies. How I wish the warning from both the SVB and FTX crashes are loud enough to wake them up.
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Well... I see it completely different. Banking system is a legalized fraud. Basically, established 110 years ago - more or less, the nowadays existing version. They are not essential at all. Essential for control, power by the money weapon. They are not competent, at all - mean in the average people eyes. Anyway they are, they run a huge legalizied fraud, and they do only that well. Look the 'banking crises' in the past, even before FED's established.
https://en.wikipedia.org/wiki/List_of_banking_crises
The list is far from complete. If this is the essential, competent and efficient in eyes of the people... well, then probably there is a problem with me... :) :) :)
banks are infiltrated in most of the cryptos one way or an other, so impossible to say what happens with crypto if banks would start to go down in mass.
1 more thing the FDIC insurance is a joke...
https://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corporation
If I would run an 'insurance' company like this, I would find myself in prison very fast. If the system owners do, it is okay, and people even love it... :) :) :)
Probably they did not have the coverage for the under 250k balances, but if 1-2 more similar size of banks would collapse, they definetly couldn't cover those... illusion...
An other funny thing what you wrote:
Then where is the money??? They just doubled the circulating money supply in the last decade, so where is it??? It is not in the mid- class pocket, nor below. Also not in my pocket. So where the hell is it??? It is not few notes or coins, so where is it exactly?? Anyone??? :) :) :)
How Elon Musk said about the moon landing: 'It is so fake that it looks real.' I think something similar stands for banking, monetary system, too.
With trackable cryptos, like BTC, it can get much worse, as basically BTC is not that much different like their CBDC dreams... and if you mentioned Satoshi - not sure he/they are real -, his imagination at the beginning of the BTC included the complete privacy... well, turned out it is not included in most of the cryptos in the end... so can be central bankers, its owners, gov agencies the Satoshis??? :) :) :) and they just create a circus, show to drive people willingly towards their tech, surveillance state, slavery utopia??
If you are looking for a simple and convenient way to manage your finances, you should pay attention to Varo Money. Their app makes it easy to track expenses, send money, and save. I like that they have no hidden fees and everything is very transparent, you can read the varo money review first. A good option for those who value convenience and control over their finances.
You yourself give the answer to your last question in the considerations, the traditional economy does not and will not allow bitcoin to function in peace. Never, as long as they maintain political and financial power, will they allow money to be managed by the people, that is the true power of the system, to manage the money of others at will and convenience.
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Nakamoto was right, time tells everything....
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Your money is in your hard work and in your luck. All these things doesn't matter for me.
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The government didn't bail them out to be charitable. It was to try to keep things running their way, at least for a little while longer...
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