We're One Bank Run Away From Collapse

The current economic crisis is testing the traditional banking system and it’s stability and it is increasingly being questioned. Bitcoin and gold are emerging as more attractive investment options. This shift is driven by a significant increase in the number of banks at risk of collapse and recent developments in the crypto currency sector particularly with Binance reinstating Mastercard payments.

Over 60 Banks At Risk Of Collapse

The Federal Deposit Insurance Corporation (FDIC) recently released a quarterly report revealing that 63 banks are now on the brink of insolvency. This is a notable increase from 52 banks in the previous quarter and signifies a growing concern within the banking sector. The FDIC's report indicated that the assets held by these troubled banks surged by USD 15.8 billion to a total of USD 82.1 billion during the first quarter of 2024. This instability has been increased by the Federal Reserve's series of interest rate hikes which have led to higher unrealized losses on residential mortgage backed securities which now total USD 517 billion in the states.

Other nations including Australia who leads the world with mortgage pain are suffering similar issues when it comes to repayments and debt.

This precarious situation has made investors wary especially those with significant deposits in these banks. The Deposit Insurance Fund (DIF) despite its balance of USD 125.3 billion is under pressure.

The fund's reserve ratio of 1.17% is on track to meet the statutory minimum of 1.35% by 2028 but this provides little reassurance. In the event of a minor bank run the DIF's capacity to cover losses is questionable, increasing the risk for large depositors and pushing them to seek safer havens.

Bitcoin and Gold Being Touted As Safe Havens

Both Bitcoin and gold have become more appealing to investors. Bitcoin, often referred to as digital gold has seen increased interest as a hedge against traditional financial systems. Gold, with its historical reputation as a store of value, continues to attract those looking to preserve wealth amidst economic uncertainty.

Bitcoin's appeal is further bolstered by its finite supply and decentralized nature which protect it from the inflationary pressures and systemic risks that traditional currencies face. Gold meanwhile, has rallied to new record highs. Although some investors are shifting their funds towards interest bearing deposits to combat inflation. The intrinsic value of gold and its role as a safeguard during financial crises remain strong attractions.

Mastercard and Binance Resolve Issues

In a move that puts Binance back in the spotlight and increases the legitimacy and integration of crypto currencies into mainstream finance, Binance has been allowed to resume Mastercard users to purchase crypto currencies on its platform.

This follows a suspension in August 2023 due to legal challenges faced by Binance in the U.S., including charges from the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).

The reinstatement came after an extensive review of Binance's controls and processes. A spokesperson from Binance expressed optimism about this development indicating plans to extend support to withdrawal services in the future. Mastercard confirmed this decision, highlighting that the approval was based on Binance's enhanced controls and processes and is subject to ongoing reviews.

This development is significant as it facilitates greater accessibility to crypto currencies for a broader audience and reinforces the perception of digital assets as a viable alternative to traditional banking. Both Visa and Mastercard have shown enthusiasm for the crypto space and are exploring innovations in Web 3.0 and self custody wallets, further integrating digital assets into the financial ecosystem.

The risk of rising bank instability and advancements in the crypto currency sector points to a broader shift in investor behaviour. As traditional banking systems show signs of stress, alternative assets like Bitcoin and gold offer perceived stability and security. The ability to purchase crypto currencies via Mastercard on Binance not only enhances convenience but also signals growing acceptance and adoption of digital currencies.

This trend is reflective of a broader reassessment of investment strategies in response to economic uncertainties. With the Federal Reserve's interest rate policies contributing to banking instability and inflationary pressures, investors are increasingly looking towards assets that are less susceptible to these risks.

We’re not out of the woods just yet and it is looking like another year of financial uncertainty so people are being advised to be fiscally responsible throughout the next 12 months.

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Posted Using InLeo Alpha