Bitcoin: “I didn’t do it.”



That’s the ruling of the jury upon digesting all the facts. Bitcoin did NOT cause the collapse of SVB (Silicon Valley Bank). Nor Signature Bank. It seems to be a “mission” of the government (SEC, Fed, Treasury, WH?) to destroy bitcoin (and crypto in general), but not in this case.

Nope, the SVB collapse was an “inside job.” And yes, the Fed was complicit as well.

The collapse of both SVB and Signature Bank will likely be covered (probably over-covered) by every media venue over the next few weeks. Every granular detail will be reported. So let’s keep it real simple and stick to the basics. The common sense basics.

The Fed kept interest rates at record lows (zero +/-) in their quest to get inflation back up the “normal” 2%. COVID came along. The government “locked down” the populace to reduce the spread of the virus. Since people did not go to work, the government sent trillions of dollars in COVID relief funds to people who could not spend it, since things were closed and supplies were scarce.

So COVID ends and the populace, now flush with cash, rushes to make up for lost time and goes on a spending spree and…….gasp……inflation spikes. The Fed is “shocked” that those factors could actually cause inflation. Non-transitory inflation too. Who could possibly know?

Now the Fed realizes they made a mistake and let inflation get out of control. So, they vow to quash their inflation “boo boo” (and get it back down to 2%) by raising interest rates. And raise them quickly. BUT, it seems banks (SVB, Signature, more?) are loaded with low interest bearing treasuries that lost principle when the Fed hiked up interest rates. And, with banks able to leverage their deposits at 10-1 their reserves sort of…….vanished.

Once again, the Fed is “shocked.” Who could possibly see that coming?

So here we are. The Fed caused inflation and the Fed caused the banks’ collapse. I’ts an inside job. But, they need a scapegoat. Ah, it’s bitcoin’s (crypto’s) fault. That’s it, blame bitcoin because we all know that it is a threat to the financial system. Uh, NO. the jury of common sense says bitcoin is NOT GUILTY.

(Note: perhaps the Treasury Secretary and Fed Chair should take refresher economics courses. I recommend the Neeley School of Business at TCU. Great basics.)