US Bank Deposits Continue To Fall, What It Means For Bitcoin?

According to Genevieve Roch-Decter, CFA, US bank deposits are about to slip under $17 trillion for the first time in over 2 years. It could be an indicator that people are moving their money from banks to cryptocurrencies such as Bitcoin.

US Bank Deposits Declines

One potential reason for this trend is the recent spate of bank failures in the United States. In 2023, the major banks – Silicon Valley Bank, Silvergate Bank, Signature Bank, and First Republic Bank – all collapsed, leaving many depositors without access to their funds.

In the case of Silicon Valley Bank, a large portion of the bank’s portfolio was invested in Treasury and mortgage bonds, which lost value when interest rates rose. This led to a panic among depositors, many of whom were tech startup founders, who rushed to withdraw their money from the bank.

Signature Bank and First Republic Bank also failed due to a high percentage of uninsured deposits and a large number of wealthy customers with deposits exceeding the FDIC-insured limit.

Bank and Bitcoin Rally

The fall in bank deposits can also be influenced by inflation, growing mistrust, and recession. Inflation, for instance, has been a major concern for the US economy, with the pace of price rises reaching 4.9% in the 12 months to April. This is down slightly from 5% in March, but still marks the tenth month in a row that price rises have slowed.

To control inflation, FED has sharply raised interest rates. While this move has helped to slow down price rises to some extent, it has also had an impact on bank deposits. With interest rates rising, people may be seeking alternative investment opportunities that can provide better returns, such as cryptocurrencies.

Bitcoin has often been touted as a potential inflation hedge due to its limited supply and decentralized nature. In times of high inflation, investors may turn to Bitcoin as a store of value. While some investors may see Bitcoin as a potential safe haven asset, others may view it as a highly speculative and risky investment.