![]() ![]() Is the crowd on the wrong side of the trade again? The notion that higher interest rates are favorable for banks and crypto being dead are two recent instances of "the crowd" being on the wrong side of a trade. Fast forward to today, and Bitcoin is up nearly 70% year-to-date. However, to the surprise of many, Bitcoin has shown incredible resilience, even in the face of the current macroeconomic climate. In 2022, several exchanges, tokens, and brokers blew up – ultimately culminating in the demise of one of the largest crypto exchanges, FTX. Crypto is dead: As if the crash of Bitcoin from nearly $70,000 to under $20,000 wasn't enough, the recent "crypto winter" led to a snowballing effect and ice-cold sentiment into the new year.Ultimately the bond bets, coupled with an increase in withdrawals, led to the bank's demise and set off a domino effect in the industry. This cycle, Silicon Valley Bank set off a firestorm by making ill-advised bond bets that would benefit if rates stayed near rock bottom lows and suffer if they didn't. However, rising interest rates are not always positive – especially when they rise as fast as they have recently. When rates rise, banks can take advantage of the spread between the interest that banks pay to customers and the interest the bank can earn by investing. "Higher interest rates are good for banks." If banks are managed properly, this notion can be true.For example, the prevailing mindset into 2023 was that: If history teaches us anything about Wall Street, it's to expect the unexpected.
0 Comments
Leave a Reply. |