08 May Hodling crypto will starve the banks
More and more people are investing in Bitcoin and other cryptocurrencies lately. Some are more interested in making money from it, and others are more interested in changing the world. Luckily, investing in Bitcoin and other cryptocurrencies is a great way to accomplish both goals simultaneously. The more cryptocurrency you buy and hold as opposed to saving and investing in traditional financial assets, the more you will starve the banks, and inevitably they will die from this starvation.
AUM: the Bankers’ most important number
Assets under management (AUM) is the single most important number in the banking business. This number represents the total market value of assets managed by banks and financial institutions on behalf of investors. The definitions vary by company but in addition to investment assets such as stocks, bonds, and other financial derivatives, they often include bank deposits and cash.
AUM is so important because the mix of assets determines the overall strengths and weaknesses of financial institutions (i.e. AIG and Lehman brothers were weighted a tad heavy in subprime mortgage derivates). Financial institutions also use AUM as a marketing tool to attract large investors who want to know the relative size of their assets compared to other competitors.
Bitcoin: a huge threat to Bankers’ AUM
Given the importance of the AUM figures, now let’s take a look at how Bitcoin and other cryptocurrencies pose a threat to the assets under management for financial institutions.
- For all intents and purposes, Bitcoin and the overall cryptocurrency market has outperformed all asset classes offered by financial institutions. The capital gains clocked by crypto assets are more practically measured in X’s (i.e. 10X gains – or 1,000%) on a yearly basis as opposed to the % increases expected in equities (i.e. 7% for the S&P 500 index).
- In addition to acting as a speculative investment asset for many investors, cryptocurrencies has be used effectively as digital cash and are highly liquid. Bitcoin and other cryptocurrencies can indeed be used as a savings account and withdrawn from and deposited to as needed.
There is little point in leaving your money with a bank at this point as interest rates are non-existent. However the banks continue to loan our money out to others for a profit but do not share any of these profits with us.
The need for a global currency
We also need global currencies and don’t trust any centralized body to run this currency, seeing what’s happened and continues to happen across the board with the fractional reserve central banking system.
We can spend and transfer bitcoin and other cryptocurrencies without having to give any reason or explanation whatsoever. Once we create a transaction, it is confirmed by a global, decentralized network of computers who all agree on one truth. This is quite a cool thing. In fact, we as cryptocurrencies love it and banks do not offer this.
We actually own our cryptocurrencies
Leaving our wealth in banks in the form of deposits and other investment accounts is quite a risk to take. With crypto, we get to hold and truly own our wealth ourselves without needing to trust any third party.
The banks and proponents of banks will downplay this risk, but it’s quite important to remember what happened to people in Greece and Cyprus in recent years. The banks stole their money to pay for their government’s mismanagement of their economies. People in other countries like Zimbabwe and Venezuela don’t have any protection from this at all, and our friends over there have been quite savvy to join the cryptocurrency movement en masse.
Bitcoin is here to stay. Banks are not.
Bitcoin is not going anywhere. People across the world are all buying more Bitcoin and other cryptocurrencies. Simply put, it’s a better place to keep our money. We get bigger rewards for keeping our money in cryptocurrency, have more freedom to use it, and don’t need to worry about banks lending it out or not allowing us to access it.
The more cryptocurrency we buy in lieu of traditional financial assets and savings/checking accounts, the more banks and other financial institutions will need to borrow from their competitors. If financial institutions don’t adapt to incorporate cryptocurrencies into their services, the banks will surely starve, and eventually die out. Hodl crypto to starve and kill the banks.
Hold On for Dear Life