There are concerns that the recent collapse of Silicon Valley Bank could lead to a crisis similar to the 2008 financial crisis, as it highlights the vulnerabilities of the fractional reserve system. With traditional banks only holding a fraction of the deposits they take in, they rely heavily on investments and lending to maintain liquidity. In contrast, cryptocurrencies such as Bitcoin are decentralized and rely on a distributed ledger system called blockchain, where transactions are verified and recorded across a network of computers without the need for intermediaries like banks.
With the current concerns about bank runs and financial instability, many people may begin to consider crypto as a viable alternative. This is because, as mentioned earlier, stablecoins like Tether and USDC are backed 1:1 by reserves, meaning they have a direct, transparent relationship between their tokens and the assets they represent. Additionally, the decentralized nature of cryptocurrencies means that they are not subject to the same regulatory risks and centralized control as traditional banking institutions. As such, it’s possible that we may see more people turning to crypto as a perceived safer alternative during times of economic uncertainty.
