‘Economic and Financial Disaster’ – Yellen Issues Stark $31.4 Trillion Warning After Bitcoin, Ethereum and Krypto Prices Rise
05/8 update below. This post was originally published on May 6
BitcoinBTC, ethereum and cryptocurrencies have been thrust back into the spotlight this year by the US regional banking crisis that may be about to start.
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The price of bitcoin has almost doubled since hitting lows of around $15,000 per bitcoin late last year, with ethereum, the second-largest cryptocurrency, climbing alongside it – despite co-founder Vitalik Buterin issuing a dire bull run warning .
Now another ethereum founder, Charles Hoskinson, who went on to create ethereum rival cardano, has warned the banking crisis will be worse than the 2008 global financial crisis that led to the creation of bitcoin.
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“In 2008, we had $373 billion in committed assets,” said Hoskinson, who co-founded ethereum with Buterin, Joe Lubin and five others in 2014. Fox Businessreferring to the combined $373 billion in assets held by failing banks in 2008.
CardanoADA, 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.
“I think we’re over $540 billion now just in the 2023 crisis. We’re just getting started. That whole business model falls apart when you give it a little push and then you lose these institutions like Silicon Valley Bank and they become so politicized and they become so globalized.”
05/8 Update: US Treasury Secretary Janet Yellen has warned the US of a “constitutional crisis” that risks “economic and financial disaster” if the $31.4 trillion debt limit is not raised. “If Congress fails to meet its responsibilities, there are simply no good options,” Yellen said in an ABC interview.
US lawmakers have reached an impasse over raising the debt ceiling, which Yellen warned could be breached as soon as June 1. This week, Biden is scheduled to meet with congressional leaders for talks to try to resolve impasses.
“If they fail to do that, we will have an economic and financial disaster that will be of our own making, and there is no action by President Biden and [the] The US Treasury can take to prevent that disaster, Yellen said.
In March, sudden deposit flights from Silicon Valley Bank and Signature Bank forced the Federal Reserve to step in with emergency measures, but the panic spread to Switzerland’s Credit Suisse, which had to be bailed out by rival UBS.
This week, regulators seized First Republic BankFRC and sold its assets to JPMorgan, the largest US bank by assets.
“Our government invited us and others to step up, and we did,” said Jamie Dimon, JPMorgan’s chief executive, who played a key role in the 2008 financial crisis. JPMorgan, which already held more than 10% of total U.S. bank deposits, will see its net deposits increase 3% as a result of the deal, according to Wells FargoWFC analysts.
“What’s going to happen is that ‘too big to fail’ will only lead to bigger institutions,” Hoskinson said. “We’ve seen this story in 2008. And this is the replay. I don’t think anyone wants to see it.”
The 2023 banking crisis has been partly triggered by the Fed’s rapid series of rate hikes over the past year, with rates this week climbing to levels not seen since before 2008 in an effort to rein in inflation.
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Others, meanwhile, have warned that the banking crisis could spiral out of control if confidence in the system is restored.
“Trust in a financial institution is built over decades and destroyed in days. As each domino falls, the next weakest bank begins to wobble,” Bill Ackman, CEO of New York hedge fund Pershing Square, posted to Twitter.
“We are running out of time to fix this problem. How many more unnecessary bank failures do we have to see before the FDIC [Federal Deposit Insurance corporation], and our government wakes up? We need a system-wide deposit guarantee regime now.”
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