Twitter is a mess these days. Maybe I just follow the wrong people but many many self-interested crypto people are screaming that the traditional money system is game over and we will be entering hyperinflation where dollars will be worthless and people should long $BTC. It’s truly embarrassing how these attention-seeking cryto talking heads behave. All the evidence we have so far indicates a mild crisis, not an apocalypse. The unrealized losses banks have right now are a lot smaller compared to 2008 as shown below. SVB, First Republic and Signature Banks are in trouble because they have a flighty deposit base, hold long term debt and are not stress tested. But they are the exceptions, not the norm. Most smaller banks have a much stickier deposit base. They can navigate the duration mismatch a lot more easily. Large banks are regularly stress tested and are unlikely to fail.
Credit Suisse was rescued over the weekend. CS has been in trouble for the longest time and is basically a zombie bank. Remember Archegos blowup? CS lost $5.5B in that one scandal. The SVB collapse is a trigger for CS’s collapse because wealthy clients suddenly realize they probably shouldn’t put all their (uninsured) deposits in one bank and quickly diversify their deposits out from CS to other banks. But Credit Suisse’s demise is hardly a surprise. People have been talking about it for months. Call me contrarian but I think the mild banking crisis we are experiencing right now is a good stress test to clean out the excess, expose vulnerabilities and root out badly run banks. It’s not the end of the world, unless people are all persuaded to abandon their banks for bitcoins. I am very disturbed by these pro-bitcoin loud voices claiming that fiat currencies are about to be worthless on Twitter. Sure, the fiat world is imperfect. But is the bitcoin world really better? Or is it just an ideology like Marxism and when it’s put to practice, it will turn out to be even worse, if not catastrophic. I hope these bitcoin maximalists can build their own country and thoroughly test it out, instead of trying to burn down the TradFi world before proving themselves.