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The collapse of Silicon Valley Bank (SVB) last week raises serious issues far more significant than the obvious ones cited by the financial press and a broad range of Washington politicians.

Chief among these are bank loans against dubious assets. That's not getting much if any attention in the news or from Washington and is likely to soon be swept under the rug, allowing needlessly risky banking practices to continue.

Before its collapse last week, SVB made loans against Bitcoin and other cryptocurrencies.

The question: why is any bank anywhere allowed to accept crypto as collateral for loans?

Bitcoin and its imitators are not money. They are not currency. They're hardly used to buy and sell, an unsurprising fact given that by design the Bitcoin system canprocess only seven transactions per secondcompared to many thousands of transactions per second for credit cards.

Indeed, except for laundering proceeds from drug trafficking as well as hiding assets from creditors, estranged spouses, and the tax police, cryptocurrencies have no use.

High-tech Ponzi Scheme

Cryptocurrencies and their cousins, Non-Fungible Tokens or NFTsare just a high-tech Ponzi scheme. Instead ofCharlie PonziorBernie Madoffpersonally running the con, the crypto scam relies on decentralized computer blockchain and "mining" of mathematical solutions.

Bitcoin's supposed inventor, who went by the pseudonym Satoshi Nakamoto, hasnever been identified. He or she has since vanished, leaving holders with a digital string worth only as much as the next fool, or crook, will pay for this imaginary asset.

Early participants in Ponzi schemes profit mightily if they cash out while the gullible souls who get sucked in later wipe out. That is what happened to SVB, America's 16thlargest bank, which was big on crypto loans.

Many Bitcoin "investors" have already been wiped out as the "market cap" of Bitcoin plummeted from nearly $1.3 trillion in 2021 to about $389 billion on Friday,down almost 70%.

Why do banking regulators allow our federally insured and regulated banks to make loans using magic internet money as collateral? That's a crazy policy, no different than allowing banks to accept buckets of ice cubes in winter as collateral, even though they melt come spring and evaporate in summer

Silicon Valley Bank is just one of many federally insured financial institutions that accept crypto currency as collateral for loans. Some banks will loan you 90% of the seemingly value of your crypto, though 50% loan-to-value is more common and that appears to be the standard at SVB based on its web pages.

Zero Interest Crypto Loans

All sorts of financial news outlets offer advice on borrowing against crypto. These includeNerdWallet, and the increasingly nave and unreliableForbes.People with crypto can evenborrow at zero interest. Gadzooks!

For a sober look at the big risks of crypto loans readInvestopedia's essay.

In the wake of the second largest bank failure in history, you should be deeply concerned that for more than four decades we have failed miserably at regulating banks. That history contrasts with the period from 1935 until voters abandoned the moderating and successful New Deal banking rules in favor ofReaganomics.

We took a wrong turn when theprudent New Deal banking regulationsin effect from 1935 were killed by Reaganomics, which re-regulated banks to reduce regulations and increase the risk of financial institutions failing. (There is no such thing asderegulation, only new regulation, which in our time on terms typically means regulations favoring corporations, including banks, over customers, financial prudence, and public safety.)

Congress's Role

What we need now are Congressional hearings to examine the reasons that cryptocurrencies can be collateral for bank loans.

Contactthe White Housein writing via the hypertext link or call 202-456-1111 to demand a ban on crypto as loan collateral. Call 202-456-1111.

Even if you don't own Bitcoin or its growing list of alternatives this story matters to you for multiple reasons.

Your money is only insured up to $250,000. Any money above that isn't insured. That means if you're a trustee of a nonprofit, for example, and it's got $1 million in the bank you or the organization you help lead is at risk of being wiped out in a bank failure.

The federal government is covering all deposits for SVB and atSignature Bank in New York, which failed Sunday. But that doesn't mean it always will. During an earlier banking crisis nonprofits with more than the guarantee then in effect of $100,000 lost their deposits above that sum, which got very little news coverage at the time.

If people want to buy crypto, they should be free to do so. But they should not be allowed to put our bank deposits and investments at risk by using these digital tokens as collateral for loans. After all, it's your, and my bank deposits, along with those of businesses, nonprofits, and our governments that the banks use to make loans, so it's not like we don't have a deep interest in blocking crypto of any kind as collateral for loans.

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How Bitcoin and other magic internet money loans endanger your ... - Salon

Its the ugliest banking crisis since 2008

Over the last eight days, three U.S. banks have collapsed.

Last Wednesday, Silvergate Bank which had major ties to crypto said it was shutting its doors. This helped trigger fatal banks runs at Silicon Valley Bank (SVB) and Signature Bank.

And even though the Fed stepped in to guarantee deposits, panic has rippled through the regional banking sector.

The chart below shows the iShares Regional Bank ETF (IAT), which tracks the performance of 37 U.S. regional bank stocks.

Its plunged 43% since the start of the month.

Investors are worried the folks running these banks did the same dumb things their colleagues at SVB and Signature Bank did by taking risks with customer deposits.

And yesterday, shares in the worlds seventh-largest investment bank, Credit Suisse, plunged 24%.

This came after management at the Switzerland-based bank admitted it had found weakness in its financial reporting.

But while banks are buckling, bitcoin has been on a tear.

It soared 20% versus the dollar over the past week. And our crypto expert Teeka Tiwari says it will be a huge beneficiary of this turmoil.

As youll see below, he expects bitcoin to go much higher but hes far from bullish on the broader crypto market. Thats because of an unprecedented crypto panic he sees coming.

Ill get into that in a moment. First, its important to remember bitcoins origin story

January 3, 2009, to be precise.

Thats four months after Lehman Brothers collapsed and the eye of the storm of the global financial crisis.

As youll recall, Wall Street banks loaded up on mortgage debt that went sour. This blew massive holes through their balance sheets. And it led to bank collapses in the U.S. and around the world.

Thats when an anonymous developer called Satoshi Nakamoto released the Genesis Block.

Its the original block, or group of transactions, on the bitcoin blockchain. And Satoshi left a message in its code

The Times 03/Jan/2009 Chancellor on brink of second bailout for banks

Its from a headline in the Times of London about the British governments bank bailouts. (The Chancellor of the Exchequer is Britains version of the Treasury Secretary in the U.S.)

Why did Satoshi leave this message in the bitcoin blockchain?

He wanted us to remember the inherent instability of the banking system and present bitcoin as an alternative.

Unlike fiat currencies such as the U.S. dollar, the euro, and the yen, it doesnt rely on a central bank to issue new currency units or referee payments.

Bitcoin also gets rid of the need for commercial banks to look after deposits and facilitate payments.

You can self-custody your bitcoin in a cryptographically secured wallet app on your phone. You can send and receive payments through your wallet, too. Theres no costly and potentially corrupt middleman involved.

This is a radical departure from the way the modern banking system works.

As the folks who banked with SVB and Signature Bank found over the weekend, having money in the bank is not what it sounds like.

Deposits sit on the liability side of a banks balance sheet. If you have $1,000 on deposit in the bank, you have an IOU from the bank for $1,000.

Banks only need to back a fraction of these IOUs with cash. As we saw over the weekend, if too many depositors come for their cash at once, it can trigger a collapse.

While all hell was breaking lose at SVB and Signature Bank, the bitcoin blockchain settled about 600,000 transactions worth about $33 billion.

And in line with its pre-programmed annual inflation rate of 1.8%, it issued 2,037 new bitcoins.

Nobody lost access to their bitcoins Nobody tried to call customer service and couldnt get through And no regulators had to be called in to back anyones bitcoin.

The network chugged along, without a hitch, through the crisis.

First, bitcoin is a relatively new technology. People are used to keeping their money in the bank. Many still dont trust what bitcoins detractors call magic internet money.

Also, cryptocurrency is famous for its bone-crunching volatility.

You may be able to access and spend your bitcoin, but you dont know what it will be worth in dollar terms tomorrow.

Bitcoin reached an all-time high of $67,617 in November 2021. Then it plunged 76% to $15,814 before rising 58% to $24,954.

But as Teeka has been showing his readers, its better than finding your savings have gone up in smoke because your bank did something dumb with your deposits.

As Teeka put it in a video he sent out to his subscribers

Yes, bitcoin is volatile. Yes, you may wake up one morning with bitcoin down 50%, 60%, 70% versus the dollar. But one, you hold it. Nobody can take it from you. And two, you know that, over time, bitcoin always comes back. You dont have that risk of losing all your capital, as you do if you put it in an unstable bank.

This is why bitcoin is blasting higher. And it will go higher from here. Right now, its above $25,000. I see $30,000 as a chip shot from here.

But thats bitcoin, the worlds most trusted cryptocurrency. Teeka warns that this is not the right time to buy into the broad crypto market

And if Teeka is right, it will be a doozy.

He says it will be the biggest crypto panic in the seven years since he first recommended bitcoin to his paid-up subscribers.

Whats going on is so important that Teeka put together a special update to address it.

Its called The Crypto Panic of 2023 and its free to attend next Wednesday, March 22, at 8 p.m. ET.

In this update, Teeka is set to explain exactly what will cause this panic and how you could turn $1,000 into an entire nest egg

So make sure to automatically RSVP.

Regards,

Chris LoweEditor, The Daily Cut

P.S. Youll also get access to a special video update from Teeka about the banking crisis and what it means for crypto. Check it out here.

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Bitcoin vs. the Banks - Legacy Research Group

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Bitcoin has become the most well-known currency around the globe as the popularity of Bitcoin has inspired many other developers to develop cryptocurrencies just like Bitcoin. None of them got as high as Bitcoin has become the largest market capitalization cryptocurrency in the world. It is nothing more than a form of currency that does not have any control over the government. The transactions of Bitcoin are recorded on an independent and decentralized base known as the blockchain. All the monetary transactions of Bitcoin are recorded and stored on the blockchain network, and it also provides security to transactions through cryptographic nodes. The currency was introduced in 2009, and whoever created Bitcoin is still anonymous. A name added by other cryptocurrency developers is satoshi nakamoto. But later, he left the project in between, and some of the other developers developed Bitcoin and introduced it to the public interest. In addition, if you are looking for a reliable trading platform, you can visit BITCOINPRIME.SOFTWARE.

Bitcoin attracts many new investors and traders to join the virtual market due to its uncertain hype and regular volatile prices. You cannot predict Bitcoin prices because it is highly flammable and not regulated by any regulatory authority. The absence of government authority makes Bitcoin transactions reliable, cost-efficient, time efficient, transparent and secure as the cases of cyber hacks and frauds are regularly coming to news headlines through centralized means. But till the present time, we do not have any complaints about Bitcoin fraud or cyber hacks. Bitcoin provides security that any traditional financial institutional security system cannot challenge. Bitcoin offers several advantages if it is accepted as a medium of exchange by businesses and companies. It will take time for Bitcoin to become legal tender as the currency is still new to the market.

The top attraction of Bitcoin

Privacy

You can use Bitcoin to transfer funds anonymously from one source to another without involving intermediaries or government bodies in monetary affairs. All the Bitcoin honors are provided with multiple public keys, usually the address of the Bitcoin wallet and the information needed to execute transactions to transfer Bitcoin from one account to another. Unlike credit and debit cards, they do not require complete information about the wallet owners common name, billing and address, which means they do not need any personal information about the wallet holder to transfer funds. The only thing required to receive payments from Bitcoin is a wallet address.

Decentralization

Due to Bitcoins decentralized nature, it does not allow the government to interfere in its monetary affairs. Also, some of us prefer to avoid 3rd party interference in economic matters to transfer funds from one server to another. Also, this is an excellent choice for people who are against the system and looking forward to extra privacy. In traditional payment systems, there is always a chance of information hacks and fraud due to the presence of financial records with banks and exchanges. Also, fraudulent transactions can occur with the name of traditional trades and institutions. However, Bitcoin is a decentralized body and does not allow this kind of fraudulent transaction to take place with the help of blockchain technology.

Bitcoin value

As we all know, Bitcoin has gained hype in the last few years and is continuously gaining advertising with increasing prices. Bitcoin can be chosen over other currencies as the best or excellent store of value. There is no government rule that you cannot convert Bitcoin into something different than feet currencies. There is complete control of your Bitcoin holdings in your hand.

Low transaction fees

Whether you are investing or using Bitcoin to make and receive payments, the transaction fees of Bitcoin transfers are relatively lower than a traditional transfer. And one of the biggest problems with centralized transfers is that it takes too long to transfer funds. Using Bitcoin can help you to transfer funds in around 10 minutes which is a relatively low time. The use of Bitcoin by small-scale businesses is beneficial because they pay high fees for minimum transfers. And this leads to an increase in companies costs of up to 10%.

Security

You cannot question Bitcoin security as it uses peer-to-peer transactions, meaning no 3rd parties are involved in completing payment transfers. Only the parties involved in payments are the receiver and payment maker. Every transaction of Bitcoin is recorded on an open distributed Ledger system known as blockchain with the security of cryptographic Nodes Once the transaction is recorded on a blockchain network, the transaction cannot be altered or changed manually without private keys.

Conclusion

These are some of the top attractions of Bitcoin that lures people to invest money in Bitcoin. Also, Bitcoin has high price volatility, which gives you the opportunity to earn maximum profit out of volatility. It is possible to make maximum profit in intraday trading without holding Bitcoin overnight. On the other hand, you must be aware of Bitcoins other drawbacks, like the prices can show a bearish trend, and within a few minutes, it concerns a bullish market. Get the required knowledge before investing your money in Bitcoin and other cryptocurrencies, as it can save you from bearing losses and maximize your profit on your investments.

This post was published on March 15, 2023 7:25 pm

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What is the attraction about Bitcoin? - Star of Mysore

Bitcoin (BTC 0.09%) has been a hot topic in the financial world for years, with opinions about the cryptocurrency running the gamut from a "revolutionary new asset class" to a "dangerous speculative bubble." One thing that most experts can agree on, however, is that its volatility has historically made it a less-than-ideal safe-haven asset. But recent market movements seemed to have changed that tune. There are fewer sad trombones and more sparkly vibraphone grooves in the Bitcoin canticle nowadays.

But is the cryptocurrency really ready to serve as a long-term vault for your hard-earned wealth? Let's look closer at Bitcoin's suitability for that august role in light of recent data and expert analyses.

Bitcoin has been on a tear since the beginning of 2023, rising 45% since the start of the year. On the other hand, the S&P 500 (^GSPC 1.76%) index is up by a mere 0.8% over the same period, and gold has gained 2.6%.

Zooming out to a three-year view, you'll find that Bitcoin has outperformed the traditional safe havens of gold and broad stock market indexes again. This time, gold is up by 19%. The S&P 500's dividend-adjusted total return stops at 49%. Over the same span, Bitcoin soared 367% higher.

And if you allow me to go back six years instead, incorporating the surge of 2017 and the 2018 crypto winter into the data, we can see how a $10,000 investment in Bitcoin has performed against gold and the S&P 500 since the spring of 2017:

Bitcoin Price data by YCharts

Of course, past performance is not a reliable indicator of future results. Bitcoin is notoriously volatile, and its value could plummet just as quickly as it has risen. The chart above, impressive as it is, also shows many dramatic price drops over the years.

But it seems that Bitcoin has finally established itself as a contender in the category of safe-haven assets. As investors seek out alternatives to traditional value stores, like precious metals or diverse stock market indexes, Bitcoin's unique characteristics and limited supply could make it an attractive option for those looking to protect their wealth against inflation and currency fluctuations.

And that's right in line with the original intentions of Satoshi Nakamoto, Bitcoin's unknown inventor (or group of inventors). The cryptocurrency was designed to resist inflation through a lifetime maximum of 21 million digital coins, and 19.3 million of them are already minted. This capped long-term supply is similar to the limited amount of gold on the planet, which is why Bitcoin bulls often refer to it as "digital gold."

Despite its volatility, some market experts believe that Bitcoin could continue to serve as a safe-haven asset in the future. Beyond the gold-like supply-and-demand equation, some Bitcoin gurus point to the growing interest from institutional investors and large corporations. As a result, the cryptocurrency may be becoming more mainstream and accepted as a legitimate asset class.

In fact, companies like Tesla (TSLA 2.04%) and Block (SQ 1.38%) have even added Bitcoin to their balance sheets, further signaling their confidence in the cryptocurrency. Taking that idea to its next logical step, business software builder MicroStrategy (MSTR 5.95%) has converted most of its cash reserves into Bitcoin -- and keeps buying more coins financed by a combination of cash flows, loans, and stock sales.

deVere Group CEO Nigel Green calls the current banking crisis a "springboard event" for Bitcoin as traditional-minded investors start to treat the digital asset as a safe port in the storm. The financial shake-up may inspire others to follow in the steps of Tesla, Block, and MicroStrategy. Massive long-term inflation of the U.S. dollar is a critical part of this scenario: "Investors are therefore looking for alternative currencies, such as cryptocurrencies," Green writes in a recent press release. "Moving forward, these will increasingly compete with traditional, fiat ones, and this will help trigger the decreasing dominance of currently leading international currencies."

Nobody knows for sure where Bitcoin is going next. The crypto winter may be thawing as we speak, or another cold snap could bring Bitcoin prices down again in 2023.

But I think it's abundantly clear by now that cryptocurrencies are here to stay, and that Bitcoin will probably be a reliable store of wealth for many years. MicroStrategy chairman Michael Saylor may be onto something after all. Truly committed Bitcoin bulls with diamond hands should see stellar results a few years down the road.

That being said, I still don't want to convert my entire net worth into Bitcoin and take out loans to buy more. Leave that to the professional risk-takers for now. Instead, I'm happy with a modest Bitcoin position that could serve me well in the long run without adding much short-term risk. It's a good place to park cash you won't need for at least a year or two, allowing Bitcoin to get over speed bumps and challenges on the road to sustained wealth. In fact, that's how I think about all investments. Saintly patience is arguably the best quality an investor could have. Just ask Warren Buffett or Peter Lynch.

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Is Bitcoin a Safe-Haven Asset Now? Recent Data and Market ... - The Motley Fool

It is time to buy gold and Bitcoin (BTC), according to Mike Novogratz, the CEO of Galaxy Digital. There are multiple issues that affected the markets in recent days, including the crisis that is affecting banks such as Silvergate Bank, Signature Bank and Silicon Valley Bank. In Europe, banks have also been affected, something that could continue in the coming days.

It seems to be time to buy gold, silver and Bitcoin according to Mike Novogratz, one of the largest supporters of the cryptocurrency ecosystem. During a recent conversation on CNBCs Squawk Box, Novogratz talked about banks, lending, the economy, and Bitcoin.

During the conversation, he compared the current situation in the market with 2018s rate hikes and how this could create a similar situation as back then. There is a combination of factors that are pushing the US economy into a credit crunch and that he believes are sending the US economy into a recession.

One of the ways to stop that is for the US Fed to stop hiking rates, otherwise, things could become more difficult for the economy. Additionally, he talked about how Bitcoin (BTC) and Ethereum (ETH), the two largest cryptocurrencies in the market, have been moving in recent weeks.

When he was asked about a possible contagion to other banks, Novogratz said that if the Fed does not do something more consistent there could be more problems with regional banks, which could add more pressure to the whole banking system.

At the same time, Novogratz talked about a credit crunch and the implications that this could have on the economy.

On that matter, Novogratz said during the conversation:

Now you have a market that is gonna go into a credit crunch. How do banks rebuild capital? They lend less. And so, you are gonna see a credit crunch happening in the United States. This is starting to get priced in the markets in a dramatic way.

Furthermore, he mentioned that he would be long Bitcoin, Gold and Silver. He said that Bitcoin was also created for these types of situations and environments. Lets not forget that while traditional financial markets have been moving lower, Bitcoin and other cryptocurrencies turned bullish.

After the most recent situation with banks and the current volatile environment in traditional financial markets, Bitcoin skyrocketed and hit $25,000. Now, the largest cryptocurrency in the world is being traded above $24,000 according to data shared by CoinGecko.

At the time of writing this article, Bitcoin registered 0.7% gains in the last hour alone, pushing its price to $24,750 in some cryptocurrency exchanges. With this price, Bitcoins market capitalization is currently at $477 billion, showing its strength as the largest and most robust digital asset in the market.

Bitcoin was created back in 2008 and released in 2009 by Satoshi Nakamoto during the banking crisis in the United States that then hit the whole world. We have seen Bitcoin surge to $20,000 in 2017 and then reach an all-time high of $69,000 in November 2021.

With the current situation in traditional financial markets, Bitcoin has been moving higher, showing that there is a clear interest from individuals and investors to get access to it in difficult times. Banks are now experiencing large pressure and might need the help of central banks in order to be able to redeem all funds.

When it comes to gold, its price has been moving higher in recent weeks, pushing its price to over $1,920 per ounce. This shows that there is a clear interest not only in Bitcoin but also in this precious metal, as explained by Mike Novogratz. With the current crisis in the banking sector, it might be better to keep value in gold or Bitcoin. However, things could change at any moment, as the government might decide to take a regulatory decision that could impact the markets.

It will be very important to see how this week will finish ad Credit Suisse has also been affected in Europe and Swiss authorities are being pressed to take the necessary actions and stabilize the current situation.

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Mike Novogratz Says Its Time To Buy Gold And Bitcoin - UseTheBitcoin