Another bank drama came to light this weekend, but this time it was in the EU. In the spotlight was the Swiss giant Credit Suisse, which also faced serious problems. It will eventually be bought out by the country’s largest bank called UBS, while Switzerland’s central bank will facilitate the deal by helping with liquidity.

Bitcoin surpassed the $28,000 mark amid banking system malfunctions and hit a local high of $28,390 on Sunday. As a result, as Glassnode analysts point out, BTC posted a 35.8 per cent gain for the week. This has previously happened exclusively during bullruns, i.e. stages of coin appreciation. Accordingly, the situation now could also hint at the start of global growth.

What’s going on with the banks in the world?

The problems in the banking industry were the subject of a recently published research paper by experts from the University of Southern California, Kellogg School of Management, Columbia University and Stanford University. The authors of the paper suggest that collapse awaits at least 186 more American banks.

According to Cointelegraph sources, a huge number of banks are at risk of having their uninsured deposits withdrawn. Here’s a relevant rejoinder from experts as they comment on what’s happening.

Even if only half of uninsured depositors choose to withdraw funds, nearly 190 banks would be at potential risk of being unable to repay their liabilities. A total of 300 billion dollars of insured deposits are at risk.

The monetary policy pursued by central banks could damage long-term assets like government bonds and mortgages. And this brings losses for commercial banks. The study explains that a bank is considered insolvent if the market value of its assets is insufficient to repay all insured deposits.

The graph below shows data based on banks’ reports as of Q1 2022. The banks in the top right corner, along with Silicon Valley Bank with $218 billion in assets, have the most severe losses and the highest percentage of uninsured deposits relative to assets that are valued at market value.

As a reminder, Silicon Valley Bank or SVB belongs to the top three large banks that have closed in the US in the last two weeks. The other two banks, represented by Signature and Silvergate, have been active with various cryptocurrencies. According to some experts, the suspension of banks by government agencies was a clear signal against the crypto market.

The problem in the banking sector has become so serious that it was announced the day before by US President Joe Biden. According to him, the collapse of the three banks would not shake the stability of the entire financial system of the United States, and all customers of the closed banks will get their money back. In addition, the US President said that the recovery of deposits would not be at taxpayers’ expense.

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One of the main consequences of the Silicon Valley Bank closure was the short-lived loss of parity to the US dollar of the USD Coin Stablecoin or USDC. Circle, the company that issues USDC, had $3.3 billion in funds temporarily locked up in SVB accounts. Due to investor panic over this, the value of USDC dropped to 87 cents for a while.

The parity has now been restored, but the problems with USD Coin have set a precedent for more serious trouble for the entire stabilitycoin sphere, as stated by Moody’s experts the day before. Here’s a quote from their recent note.

So far, large stackablecoins have shown remarkable resilience, emerging unscathed from past crises in the manner of FTX. However, recent events have shown that the dependence of stablcoin issuers on a relatively small set of financial institutions is limiting their stability.

One detail is also important here – the USDC’s peg to the dollar recovered shortly after news broke that all SVB clients would receive a guaranteed refund of their funds. Had that not happened, Circle’s problems could have been noticeably more serious. And it’s not just Circle, but the rest of the stablcoin issuers are also working with the banks. So the analysts’ message is simple – this fact alone would significantly slow down the development of the sphere.


We believe that the current problems of banks do contribute to the popularity of cryptocurrencies, which are at least independent from the decisions of bankers and governments, as well as characterized by fixed inflation rates and limited maximum supply. Coins and tokens used to seem like pretty risky assets, but now conventional bank deposit holders can also face the risk of losing their funds. Consequently, there are fewer obstacles and more reasons for people unfamiliar with crypto to get involved with bitcoins and other cryptocurrencies.

Against this backdrop, the digital asset market is showing notable growth. It is worth noting that this can also occur in the form of a so-called self-fulfilling prophecy. In other words, people may believe that others are buying cryptocurrencies because of the banking crisis and buy them as well. And even if no one actually buys digital assets in an attempt to protect themselves from the problems of the traditional financial system, the belief in such a thing will just lead to the growth of the coin market, i.e. the fulfillment of this prophecy.


What do you think about this? Share your opinion in our Future Rich Cryptochat. We’ll discuss other important developments related to digital assets there as well.

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