High Inflation & Ongoing Banking Crisis Driving Further Crypto Adoption

The American public has recently been accosted by a series of unfortunate economic situations – a banking crisis, geopolitical tensions, the threat of a recession, high inflation, and a seemingly hostile Federal Reserve regime.

Every bank depositor now has to remain uncharacteristically vigilant about whether their bank will stay solvent and their deposits safe, a cognitive load previously only reserved for serious investors.

The Federal Reserve is itself between a rock and a hard place, having both the banking crisis and the high inflation to steer through. Problems of this scale cannot typically be solved concurrently - the Fed must pick what to fix first.

At some point in the future, America will have to decide between keeping her banking system alive and supporting the US Dollar. They are likely to pick the banking system, potentially setting off what has been popularly predicted as the demotion of the US dollar from global reserve currency status.

Signs of this multi-polar non-dollar-denominated regime are already visible today. Brazil, Russia, and Saudi Arabia all settled trade deals with China in non-dollar currencies like the Chinese Yuan. Think about what this means considering that China has become the biggest trading partner with the majority of key countries.

Saudi Arabia is warming up to China and the greater East, as is Russia, which now enjoys cordial political and economic ties with China too.

American regulatory bodies will try everything in their power to earn back some of the dollar’s evaporating trust, which has gradually turned Bitcoin (BTC), Ethereum (ETH), and Central Bank Digital Currencies (CBDCs) into compelling assets for banks and investors to hold.

In a low-interest environment, it makes sense to buy long-term mortgage-backed securities and treasury bonds, as First Republic and Silicon Valley Bank did.

Following the Fed’s rate hike cycle, however, such investments can turn into $600 Billion in unrealized bond portfolio losses, quite easily triggering a bank run.

The current market tightening has seen people withdraw money from ‘bad’ assets, ?redirecting it into ‘good’ assets.

There’s a notable shift in favor of gold, crypto, and other real assets generally perceived as inflation hedges. Macro funds are by now for sure on the hunt for assets likely to perform in a high-interest rate environment like we’re in.

Insolvent banks aside, the American economy is now also exposed to the risk of very high inflation - at precisely the same time it’s getting all this exposure to the potential value of Bitcoin as an alternate stable financial system.

Sizeable portions of the world’s largest economy have by now at the very least considered BTC as a potential safe-house to flee to in the event of further economic implosion.

In a complex, fragile system where anything could break, you must take steps to protect yourself. One step might just involve building a hedge, in the form of BTC or some other crypto, for yourself.

BTC continues to demonstrate its geopolitical and macroeconomic value to a much broader demographic base beyond just the younger Web 3 generation. Bitcoin would require an extra zero added to its current total market cap before it’s relevant on a scale similar to the US Dollar, Chinese Yuan and Gold payment systems.

Granted, BTC can be a little hard to explain in many parts of the developed world where the money works and the governments work. It makes much more sense in parts of the world where neither the governments nor the banking systems work.

Cryptocurrencies are resonant with the future because financial innovation must move at a pace similar to that of current digital innovation. Current technology allows us to shop, socialize, conduct business, build communities, and communicate online 24/7.

There isn’t a reason why financial infrastructure should not be open 24/7, decentralized, and with permissionless access to money.