Bitcoin rises as traders anticipate central bank liquidity

Anticipating a further wave of quantitative easing to ease anxiety around the banking system, traders have been shorting banks and going long bitcoin.

“But deeper than the short bank long BTC trade is the fact that financial institutions are failing again,” Wade said. “There is a shift in perception. Bitcoin was invented for this very reason. It’s a peer-to-peer cash system that doesn’t use a financial institution.”

“Bitcoin was invented for this”

Bitcoin’s origins in the 2007-08 financial crisis as a tool to combat negligence in the financial system are again a driver of adoption.

Danny Gilligan, co-founder of Westpac’s Reinventure Fund, said the combination of the speed of information flow, through social media, with the speed of engagement with money, through digital banking, has created new risks for banks. And the manifested risk has given bitcoin a new audience.

“It’s just become clear how fragile this situation is,” Gilligan said. “It illustrates the risks inherent in a fractional reserve banking system when depositors want to access their funds immediately and in full.”

While Silicon Valley Bank was forced to lock accounts, widely used stablecoin USDC was delinked from the US dollar that same weekend. Circle, the company behind USDC, confirmed that it had about $2.2 billion tied up in SVB that failed.

In response, Binance CEO Changpeng “CZ” Zhao converted $1 billion of Binance-affiliated stablecoins into bitcoin to bypass any issues with USDC.

“He could publicly move a billion dollars in a weekend in 15 minutes,” Gilligan said. “This is the new reality.”

Heath Behncke, chief investment officer at Holon Investments, which was the subject of an ASIC restraining order last year, said banking models were under intense scrutiny and new models could be adopted in their place.

“As it is now, the banks use a spread model where they take a risk with your money,” Behncke said.

Daniel Roberts, CEO of Iris Energy, a Nasdaq-listed bitcoin miner, said bitcoin’s role as a way to preserve wealth and complete person-to-person transactions is growing, but there are likely to be more banking crises in the coming time. year.

“Tripling the Fed’s balance sheet overnight further debases the currency, and all we see is money moving around spreadsheets,” Roberts said. “Bitcoin was invented as a way around the mess that is fractional banking.”