🔮 Is a financial collapse on the cards?

Talking points

Banks are still on the tip of our tongue and don't seem to be going away anytime soon, but is there a wider solution before we hit turmoil? Perhaps AI can take over like they seem to be doing with everything else? Let's jump into the newsletter!

Quick Market Outlook 👀

Every week so far seems to get even more interesting from the last, however with the FOMC meeting and Powell speech this week, there was a chance that we saw some volatility mixed with some violent and unexpected moves. Well, that is exactly what we got.

So, let's quickly breakdown what we have seen so far. Firstly we have $BTC ranging between $24.4k at the low and a high of $28.7k which you can see on the chart below.

As you can see, we had a BIG drop from the high of $28.7k all the way down to around $26.8k and interestingly enough this was just after the FOMC news had been released and it was announced that hike rates would likely not be halted this year, which as you can tell is not exactly good news.

Where can the market go next?

Ideally we continue to build on the momentum we have seen over the past week, however whatever goes up, most also come back done at some point. So whether this drop is only temporary before a bigger move and push towards $30k, or whether the economic news has caused a stir of the pot and we see lower, it is difficult to predict the next move so close to such events.

What we do know is that $BTC and the markets look much better than they did at the start of the year, so there is always a positive. As usual, make sure you do your due diligence and have a plan ahead to protect yourself and your assets.

🏦 More banks to collapse?

The financial world has been… let’s just say interesting, especially with the news of Silicon Valley Bank's (SVB) collapse, which has highlighted the vulnerability of the traditional financial system.

SVB's downfall was attributed to a combination of losses, uninsured leverage, and an extensive loan portfolio, among other factors. Unfortunately, SVB is not alone in this situation, as nearly 190 banks operating in the United States are now potentially at risk too.

This has come after economists warn that a large number of banks are at risk of uninsured deposit withdrawals, which can lead to insolvency and that is definitely not what many people want, mainly because the catastrophic negatives and turmoil it would cause could be the worst we have ever seen and I’m sure you can imagine what kind of problems would occur from a financial disaster, right?

So, you are probably wondering how this works? When the mark-to-market value of a bank's assets, after uninsured depositors are paid, is insufficient to repay all insured deposits, that bank is considered insolvent. Central banks' monetary policies can also contribute to long-term asset losses for banks, such as government bonds and mortgages, so looking great! Kidding, we may want to give this one a miss.

A recent report analyzed the assets of U.S. banks based on call reports as of Q1 2022. The data shows that banks including SVB, have the most severe asset losses and the largest percentage of uninsured deposits to mark-to-market assets. This situation, combined with the recent rise in interest rates, which caused a $2 trillion drop in the U.S. banking system's asset market value, poses a threat to the stability of some U.S. banks.

It is crucial to note that not all banks are at risk of insolvency and that the U.S. banking system is robust and able to withstand economic downturns. However, the current situation highlights the need for banks to manage their assets and leverage carefully, and for regulators to monitor and mitigate risks in the banking system.

Let's not forget that SVB and other recent bank collapses are a reminder that no bank is too large to fail and that the banking system is also not immune to risks.  While the situation may seem concerning, it is an opportunity for the banking industry to learn from past mistakes and improve risk management practices. By doing so, the banking system can continue to serve the economy and provide stability to consumers, but either way the trust in banks has been harmed and reassurance is going to be needed as well as solutions to avoid a major financial and economic disaster.

🤯 Future president to ban CBDCs?

Just as we think we are progressing with AI, things take a negative turn. Well, obviously AI is super useful and massively trending but this time it looks like we've got a bit of a firebrand on our hands!

Governor Ron DeSantis of Florida, who is believed by many to take a run at the White House in 2024, has just sprung a spring into action by calling for a ban on a digital dollar in his state, this is most definitely a bold move.

Before we continue, here is a super quick breakdown of what a CBDC is:

Okay, back to DeSantis and his actions.

During a press conference recently, DeSantis boldly stood in front of a podium with the ominous phrase "Big Brother's Digital Dollar" emblazoned on it, and proceeded to rail against the Federal Reserve's plan to issue and control a central bank digital currency (CBDC) in the United States. He then argued that such a move would only give the government more power and greater access to Americans' personal information, ultimately leading to greater control over their behavior, which if you ask us, he has made a point that many people within the Web3 space are worried about.

DeSantis cited concerns over inflation, rising interest rates, and pressure on banks as examples of government policies that have a direct impact on U.S. consumers. He claimed that a CBDC would only serve to further empower the government, giving them a direct view into all consumer activities and ultimately paving the way for even more intrusive surveillance, which evidently know one wants, right?

The Florida governor also dismissed arguments in favor of a digital dollar, such as the need to reach the underbanked and address environmental concerns, without citing any evidence. Instead, he highlighted the digital Yuan from China as an example of the control it allows the government. So yes, perhaps DeSantis' persistence here is a good thing for everyone.

What is clear here is that DeSantis truly does not like the idea of digital CBDCs, which many in the Web3 space would most likely agree, after all, the decentralization part of this is what many most like, less control and a sense of power for your own assets.

🤖 AI taking our money?

Have you got a strong coffee? Because you're going to need it while reading this. And yes it is AI related, so it is obviously going to be a juicy bit of content!

So, in short we are absolutely being taken over by AI and you need to retreat to your underground bunker immediately if you have one, this is not a drill, we repeat THIS IS NOT A DRILL.

Only kidding, in all seriousness AI could be taking your money though, but how you're wondering?

Well, this is another instance to be cautious about as an AI focused decentralized app has reportedly stolen roughly $1M worth of assets from its users.

CertiK, a blockchain security organization, reported on the Harvest Keeper project, which promised high returns of 101% in 21 days. In reality, it absconded with almost $933,000 from its trusting patrons. On top of that, there have been accounts of ice phishing attacks across multiple networks resulting in losses close to $219,000, not good at all.

CertiK is stressing the need for anyone who authorized the Harvest Keeper project to immediately cancel those permits and stay far away from the platform, so any exposure to this we would recommend leaving this newsletter read IMMEDIATELY and resolving that. Unfortunately, this situation reminds us that we must remain vigilant and be careful about what we accept from the internet.

We already know that security is an issue within the Web3 space, with scams constantly appearing but being as vigilant as possible is the only way to reduce this, so if you are never sure about something, make sure you do your due diligence before jumping into it, and yes we know FOMO can often make this more difficult, but losing assets would be even worse than missing out on some small profits, right?

Stay safe and keep rocking, you’re part of a greater future within the Web3 space!