Since the World Financial Crisis in 2008, we have not experienced such a radical, market downturn as we do now. Banks lost the confidence of many investors. They haven’t been able to recover from it yet and are in trouble again. It is good Bitcoin and cryptocurrencies in general. In the following lines we will look at why cryptocurrencies have a huge chance of success.
Investors do not trust banks
2008 fully exposed the fragility of the financial system built on banks. It was the banks that were in the midst of the crisis when they lent to people who could never repay them. In the end, the financial crisis has revealed the fact that banks do not control the situation, and when it goes tough, they blindly rely on the state to save them.
This was also reflected in investor confidence in the banking sector. Investors understand that the mammon of bankers is virtually borderless. The lack of ability to anticipate the crisis also led to further uncertainty. In fact, nobody knows what is going on behind the closed doors of banking institutions. The following chart shows the reference index for the banking sector.
Between 2007-2009, the banking index fell by almost 85%. It’s funny that bankers often blame cryptocurrencies for their volatility, while the banking sector experienced a virtually identical massive slump as Bitcoin in the last bubble. As you can see in the picture, the bank shares did not even reach the prices they had before the financial crisis and are already in troubles again.
The current decline has so far reached a maximum of 50% loss of value. These are, of course, huge figures for the sector on which the current financial system stands. And that’s just the beginning. What awaits us after months of quarantine cannot be predicted exactly, but the trend that is set is quite obvious. Continued loss of confidence.
Losses for Banks = Opportunity for Bitcoin
Banks lose economic stability in addition to people’s trust. Of course, for now, they do not have to worry about anything, because even if they are operating in a completely disastrous way, the state cannot afford to let the banks collapse. This will further undermine trust and it is logical to ask where people will turn.
Cryptocurrencies are offered as an absolutely clear solution. Cryptocurrencies offer at least part of the services provided by banks. However, the primary advantage is the ability to be your own bank. If someone wants to secure access to their money even in times of crisis, they have an obvious solution. Create your own wallet crypto, which will always be available.
The bitcoin-led cryptocurrency now has a completely fascinating opportunity to prove its worth. Due to world instability, Bitcoin can prove to be the perfect alternative to a corrupt 1.0 finance system. One of the things every cryptocurrency owner can do is explain to friends how Bitcoin works and why this digital currency is a potential way forward.
However, it is also important to note that cryptocurrencies are still not ready for global adoption. Bitcoin is slow. The Lighting Network operates only in a very limited mode. Even the other cryptocurrencies are not as good as they would need. Ethereum only handles hundreds of transactions per second (token – in tens of ETH), XRP is a centralized Ripple financing service, and other cryptocurrencies are also not yet sufficient.
But cryptocurrencies evolve every day, and the time may soon come to replace the original, financial system. This is one of the reasons why it is wise to be the owner of cryptocurrencies.