Bitcoin Bros can’t stop gloating over the banking crisis

by James · March 21, 2023

Illustration by Elizabeth Brockway/The Daily Beast

Three banks have crashed and another is on life support, the US banking system is on rocky ground, and fears of a recession are skyrocketing. But one group is excited about the current situation: Bitcoin bros.

The collapse of Silicon Valley Bank this month, along with the smaller Signature and Silvergate banks, was followed by a rally in the price of Bitcoin after a painful year that wiped $2 trillion of value out of the crypto market. Largely silent since the fall of industry darling FTX, the crypto enthusiasts have resurfaced on Twitter in recent weeks to brag about their investment — even as others worried about their ability to pay the bills.

The chest pounding started on March 10, when a massive run on the bank caused SVB to collapse. The bank was a lifeline for many in the tech industry, including small startup founders, who began to panic about not being able to pay their employees or put dinner on the table. Major national economists warned of a contagion that could flatten even more banks and drag down an already struggling economy.

However, some Bitcoin enthusiasts chose that moment to take a victory lap.

“Banks are failing. I wonder where I can put my money where I don’t have to trust anyone? Like maybe Bitcoin?” crypto entrepreneur and advocate Dan Held tweeted that day, adding a smiling emoji.

“RT if you trust #Bitcoin more than banks,” Bitcoin Magazine, host of the annual Bitcoin conference, tweeted that weekend.

A few days later, the federal government announced that it would guarantee deposits in the bank, making all SVB customers whole. The move saved thousands from financial ruin, but sparked debate over whether another bank bailout — even one not funded by American taxpayers — was the right call.

Bitcoin bros just saw it as an opportunity to post.

“#Bitcoin will never need a #Bailout,” tweeted Michael Saylor. He later retweeted a video clip of crypto podcaster Natalie Brunell’s Fox News appearance, in which she declared that “Bitcoin worked this weekend when the banks didn’t,” and that the US dollar is “dying of a thousand cuts.”

“This is our time!! Let’s go team $BTC!! Let’s go $ETH!!” tweeted Galaxy Digital CEO Mike Novogratz. “The decentralized revolution is happening.” (Novogratz famously got a tattoo of another cryptocurrency, Luna, weeks before its value crashed to zero.)

USA BITCOIN/CONFERENCE

Mike Novogratz, Founder and CEO of Galaxy Digital

Marco Bello/Reuters

The cheers only got louder as the price of Bitcoin continued to rise last week. Tyler Winklevoss, the tech entrepreneur whose crypto company, Gemini, is facing charges from the Securities and Exchange Commission, predicted on Friday that the price of Bitcoin could reach $30,000 by the end of the weekend.

Former Coinbase CTO Balaji Srinivasan took it even further, betting a follower on Saturday that Bitcoin would reach $1 million within 90 days. “You buy 1 BTC. I’ll send $1 million,” he tweeted. The pseudonymous follower took the bet; He told The Daily Beast via Twitter DM that the two sides were just “ironing out the details with a lawyer.”

Joshua White, a finance professor at Vanderbilt University, called these bold predictions nothing more than “hype” meant to boost the value of Bitcoin. He noted that buying Bitcoin from a crypto exchange like Coinbase or Binance was not inherently safer than investing with banks, because those exchanges could also go bankrupt and lose customers’ money. Users can store their tokens in their own crypto wallets, he added, but that requires a fair amount of technical knowledge.

“I can’t imagine the mom and pop running a wine store in Nashville saying, ‘I don’t trust this bank, let me put this money in Bitcoin,'” he said.

Of the crypto fans predicting a Bitcoin boom, he added: “They also argued that Bitcoin was an inflation hedge, and we didn’t see that.”

Bitcoin did not pass $30,000 by the end of last weekend, nor did it come close to its historic high of more than $65,000 in 2021. According to crypto investment group CoinShares, people took more money out of digital currencies last week than they put in— for the sixth consecutive week. Net outflows were more than $95 million last week alone, with Bitcoin seeing the most sales.

Additionally, some industry experts believe that bank failures could actually end up hurting crypto: Silvergate and Signature were two of the only banks in the US willing to work with crypto companies.

“The consequences would be very big if there is no US bank that will take on deposits from a crypto client,” said Taylor Johnson, co-founder of crypto product company PsyFi. Time. “It would be very painful and reduce crypto activity a ton for any American person or business.”

It remains to be seen whether Srinivasan will get his $1 million back.