The recent surge in the prices of cryptocurrencies such as Bitcoin, Ethereum, and Cardano has been attributed to the ongoing banking crisis in the United States, which has been predicted to be worse than the 2008 global financial crisis by Ethereum cofounder, Charles Hoskinson. Hoskinson, who went on to create Ethereum rival Cardano, has warned that the banking crisis is going to be worse than the 2008 global financial crisis that led to the creation of Bitcoin. He predicts that the crisis will be over $540 billion and that this is just the beginning.
Cardano, which Hoskinson created in 2016, has become the world's seventh-largest cryptocurrency with a market capitalization of $13 billion, compared to Bitcoin's $566 billion and Ethereum's $232 billion. Hoskinson believes that the banking crisis will result in institutions becoming bigger and that it will be a rerun of the 2008 financial crisis. Hoskinson's prediction comes on the heels of the sudden deposit flight from Silicon Valley Bank and Signature Bank, which forced the Federal Reserve to step in with emergency measures, and panic spread to Switzerland's Credit Suisse, which had to be rescued by rival UBS.
This week, regulators seized First Republic Bank and sold its assets to JPMorgan, the largest U.S. bank by assets. JPMorgan, which already held over 10% of total bank deposits in the U.S., will see its net deposits increase by 3% as a result of the deal, according to Wells Fargo analysts. The 2023 banking crisis has been partly triggered by the Fed's rapid series of interest rate hikes over the last year, with rates this week climbing to levels not seen since before 2008 in an attempt to rein in soaring inflation.
The ongoing banking crisis has led to a surge in the prices of cryptocurrencies, with Bitcoin almost doubling since falling to lows of around $15,000 per bitcoin late last year, and Ethereum, the second-largest cryptocurrency, climbing along with it. However, Hoskinson issued a serious bull run warning earlier this year, warning that the situation could get worse. He believes that the business model of the banking industry is falling apart, and that when institutions such as Silicon Valley Bank get politicized and globalized, the system becomes unstable.
Others have also warned that the banking crisis could balloon out of control if confidence in the system is restored. Bill Ackman, chief executive of the New York hedge fund Pershing Square, has warned that confidence in a financial institution is built over decades and destroyed in days, and that as each domino falls, the next weakest bank begins to wobble. He believes that we are running out of time to fix this problem, and that we need a systemwide deposit guarantee regime now.
The ongoing banking crisis and the surge in the prices of cryptocurrencies have raised questions about the role of cryptocurrencies in the global financial system. Some believe that cryptocurrencies could play a significant role in the future of finance, while others believe that they are too volatile and risky to be used as a mainstream currency. The ongoing banking crisis and the rise of cryptocurrencies highlight the need for a more stable and reliable financial system, and for policymakers to address the underlying issues that have led to the current crisis.
