If you have perused the hallowed halls of Crypto Twitter over the past few months, you’ve likely encountered “Bitcoin fixes this.” The meme, which has quickly become one of the industry’s favorite, has become somewhat of a ubiquitous phrase — a catch-all meme if you will — to use whenever the traditional world runs into a problem.
Chile is seeing a flurry of massive protests due to growing inequality — there are cryptocurrency and blockchain for you. Fake gold bars are being circulated throughout the precious metals market — meet Bitcoin. The U.S. is doubling down on tariffs on Chinese goods — you get the point.
The usage of this meme has evidently gone out of hand. It’s the internet, what else did you expect? But, a recent report titled “Half the World’s Banks Are Too Weak to Survive a Downturn, McKinsey Says” published by Bloomberg mandated (in this writer’s opinion) the use of “Bitcoin fixes this.”
Half of Financial System on Verge of Collapse
According to the Bloomberg report, storied American consultancy McKinsey & Co. recently revealed in a study that they don’t think that a large portion of the financial system is ready to survive “any [economic] downturn” that may be on the horizon.
They wrote that a “majority of banks globally”, implying more than half, are likely not running economically viable operations “because their returns on equity aren’t keeping pace with costs.” As Kausik Rajgopal, a senior partner at the firm said in an interview:
“We believe we’re in the late economic cycle and banks need to make bold moves now because they are not in great shape… In the late cycle, nobody can afford to rest on their laurels.”
Indeed. A widespread decrease in interest rates, which is where banks can make a lot of their money, and other trends in the global financial and political machine has decreased the profitability of banks and other institutions.
Case in point, the International Monetary Fund warned, according to this recent CNBC report, that negative/low interest rates “are bad for the probability of banks.”
It’s become so bad that some banks have already started to charge larger clients for storing money, a practice that would net users returns in nearly any other decade of written history. As reported by Blockonomi previously, Jyske Bank A/S, Denmark’s second-largest listed lender, is changing private customers with $111,000 or more a 0.75% deposits rate annually.
McKinsey warned in its report that if changes to the global financial infrastructure aren’t made soon, banks — at least 50% according to its estimates — risk “becoming footnotes to history”.
Bitcoin An Unconfiscatable Asset in Unstable World
While it isn’t clear how exactly banks would collapse in a future recession — there are different regulations and measures in place in different regions and for separate institutions — historical precedent should have consumers spooked.
To save the financial system earlier this decade, banks in Cyprus and the government itself had to impose a significant haircut on certain bank deposits. In Hong Kong, banks have purportedly started to stem the flow of withdrawals by decreasing withdrawal sizes.
These two cases (and many others like them) show the value of Bitcoin. Unlike fiat money held in bank accounts, Bitcoin cannot be confiscated without warning, cannot be inflated away, cannot be censored or blocked by central authorities, amongst other benefits.
And even if weak or unsustainable banks survive their inevitable demise, the debacle would give investors a reason to find a way out, to abstract themselves to leave the fiat financial system. As Travis Kling, the chief investment officer of Ikigai, has said on multiple occasions, “Bitcoin is like a CDS against fiscal and monetary policy irresponsibility”.