Bitrabo Editorial
The latest report from the Federal Deposit Insurance Corp. (FDIC) has revealed that US bank deposits experienced withdrawals worth $472 billion during the first three months of 2023. This data, which marks the fourth consecutive quarter of declining deposit totals, was the highest quarterly withdrawal total since 1984 – when the FDIC began recording the statistics. This has caused concerns about the failures of Silicon Valley Bank, Signature Bank and First Republic.
The report has also prompted a decline in US bank stocks, with the 10 largest US banks by market capitalization seeing their stock prices fall by at least 1% on Wednesday. This research is predicted to revive concerns about these banks, which were precipitated in large part by the aggressive interest rate hikes implemented by the US Federal Reserve.
How Will Crypto Benefit?
The large-scale withdrawals from US financial institutions are expected to boost the popularity, acceptance and development of cryptocurrencies. Some of the removed money may be invested in digital assets like Bitcoin, which could lead to increased demand and subsequently cause the value of cryptocurrencies to rise. The diversification of the financial system through the flow of funds into cryptocurrencies could also result in a reduction in transaction costs and shortened settlement times, whilst financial transactions may become more private, secure, and under the control of the user.
Nevertheless, the impact of bank withdrawals on cryptocurrencies is dependent on various factors, including the mood of the market, regulatory climate, and the state of the cryptocurrency market.
Silicon Valley Bank (SVB) was notable for being one of the few US-based financial institutions to provide services to cryptocurrency businesses, with over $200 billion in assets. Signature Bank’s Signet payment system was an essential component of the functioning of many major exchanges, including Coinbase. Financial filings and other records showed that First Republic’s exposure to cryptocurrencies was negligible at best.
FDIC Chairman Martin Gruenberg mentioned that inflation, rising rates, and economic pressure continue to pose threats to the industry, especially in areas like commercial real estate. However, the industry remains resilient, and the full impact of the turbulence might not be visible until the agency releases its results for the second quarter.
The diversification of the financial system fostered by the flow of funds into cryptocurrencies reduces our dependence on central banks. It remains to be seen how the withdrawal of funds from US banks will continue to affect the cryptocurrency market.
Featured image from iStock