IMPACTS ON CRYPTOCURRENCY WHEN BANKS COLLAPSE

Hello Everyone,

It's uncertain that in which condition the banks default and how the cryptocurrency market at the time of the bank defaults. As you all know that two major banks of the United States has been collapsed badly in 2023 i.e. Silicon Valley Bank. However, this bank had major assets of the US and its bond prices went down a lot when the interest rate started to rise at an unexpected level.

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However, there are many possible reasons that how bank default could impact on cryptocurrency such as:

LACK OF CONFIDENCE IN BANKS

The very first clear sign when any of the banks collapsed is that investor's confidence shake badly. They started to lose interest in the broader traditional financial system. In this way, investors look at other available options where they can be sure of their assets such as cryptocurrency.

HIGH VOLATILITY

There are the highest chances that if ever a bank default could lead to an increased volatility because investors react to the news. This way, they tried to adjust their funds according to the worldwide news because those news could be possible to break or make their investment. Though volatility could be good for traders who can make profit because prices change a lot rapidly.

LOW LIQUIDITY

Liquidity can be reduced in the cryptocurrency world especially if the bank default leads to a financial crises. In this situation, every investor of cryptocurrency tries to move their hard earned assets to the safer investment such as cash. Low liquidity means you have minimum chances to trade your assets and you can't trade with cash quickly. It also becomes difficult to buy & sell cryptocurrency.

INCREASED INTEREST IN DECENTRALISED FINANCE

Every investor tries to find alternative financial system when bank defaults. At this time, they bothered to not having a centralised system for their asses anymore. So in this way, they could find cryptocurrency more appropriate that could operated independently.

INCREASED REGULATORY SECURITY

Policy makers of cryptocurrency looks for some ways to avoid such bank default financial crises in the future which leads to increased regulatory security. And, this could impacts on cryptocurrency market. Though this regulations helps to protect consumer's assets which leads to a greater interest in trading at the safest place.

In the final thoughts, a bank default could have positive and negative impacts on the cryptocurrency market. But it all depends on the circumstances of the bank default. Which thing came into your mind when a bank default?

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