YEREVAN (CoinChapter.com) — The United States is on the verge of a major banking crisis. New York Community Bancorp (NYCB) stock price has dropped over 45%, underscoring a broader problem that will primarily affect regional banks. The development makes a bullish case for citizens to move towards Bitcoin (BTC) and other cryptocurrencies.
This event is part of a troubling trend that includes the collapse of Silicon Valley Bank, Signature Bank, First Republic, and the acquisition of PacWest by the Bank of California. While the regulatory organs try to clamp down on BTC, the imminent collapse of America’s banking landscape presents a separate argument.
What is happening to New York Community Bank?
The significant drop in New York Community Bank’s share price follows the bank’s announcement of a massive loss of $252 million for the fourth quarter (Q4) of 2023. Moreover, the bank announced a dividend cut of around 75%, sending shockwaves across the industry.
To trace the source of New York Community Bank’s troubles, one must go back to the March 2023 banking crisis. Following the failure of Silicon Valley Bank (SVB) and the more crypto-friendly Silvergate Bank, several banking institutions were hit by mass cash withdrawals. Signature Bank was one of them.
The bank saw customers withdraw over $10 billion in deposits, making it the next victim of the crisis. At the time, New York Community Bancorp, in a deal arranged by the Federal Deposit Insurance Corp, acquired most of Signature’s deposits. However, it purchased over a third of its assets, which included nearly $13 billion in loans.
In 2022, it had already purchased Flagstar Bank. The latest acquisition pushed NYCB above the $100 billion mark, bringing it under a strict regulatory framework.
Recent regulatory changes demand banks with assets over $100 billion to set aside a sizable amount as fallback in case of losses.
As a result, the recent dividend cuts were necessary to boost the cash reserves, as demanded by the regulators.
“We took decisive actions to build capital, reinforce our balance sheet, strengthen our risk management processes, and better align ourselves with the relevant bank peers,”
CEO Thomas Cangemi said.
The banking crisis is a serious issue for the US
The failures and subsequent mergers of notable banks since last year have put the banking sector under intense scrutiny. The Federal Deposit Insurance Corporation (FDIC) has introduced new guidelines aimed at stabilizing the system.
However, these measures, alongside the Federal Reserve’s stance on interest rates, suggest that the banking sector, especially regional banks, faces unprecedented challenges. These challenges highlight potential bank mergers and an inevitable impact on consumer access to credit.
As the current trajectory suggests, there will be a consolidation of the banking industry. This will lead to fewer but larger banks. This consolidation could limit competition, thus enabling the remaining banks to exercise more control over lending practices and have a larger say over banking fees.
Bitcoin is the answer to the US banking crisis?
The recent developments surrounding New York Community Bank, alongside historical instances of bank failures, raise questions about the stability and reliability of traditional banking systems.
In contrast, Bitcoin and other cryptocurrencies, while volatile, present a viable alternative to conventional banking. Case in point, one investor who took a part of his savings to BTC received a 330% return. This not only trumped any interest provided by a bank but also outperformed his investment in S&P500 stocks.
One vital difference between cryptocurrencies like Bitcoin and traditional banks is decentralization. Because BTC operates on a decentralized network, it cannot be controlled by any single entity, government, or central bank.
This decentralization is a critical advantage, especially in light of the US banking crisis. Management decisions, regulatory changes, and economic downturns have adversely affected the stability of several banks.
Cryptocurrencies, by their nature, are immune to the centralized points of failure that now impact New York Community Bank.
Individuals looking for financial sovereignty are getting attracted to BTC. The fact that every transaction is recorded on a public ledger comes as an added advantage for those looking for transparency.
In contrast, traditional banking systems aren’t particularly famous for their transparency. Because of this, the true state of their financial health remains unknown until issues become critical. Most people fail to withdraw their hard-earned money in time, leading to massive losses, as seen in the US banking crisis.
The fact that Bitcoin provides a hedge against inflation and democracies in the world of investment and finance for all isn’t lost on people.
