While the crypto market is enjoying renewed interest, a financial storm is brewing within the traditional US banking system. A report from the Federal Deposit Insurance Corporation (FDIC) reveals that no fewer than 63 US banks are on the brink of bankruptcy, threatened by astronomical latent losses of $517 billion.
U.S. banking crisis looms, 63 institutions threatened with insolvency
The spectre of a new banking crisis haunts the United States. According to a recent report of the Federal Deposit Insurance Corporation (FDIC), unrealized losses reached colossal sum of $517 billion in U.S. banks in the first quarter of 2024, jeopardizing the financial strength of 63 vulnerable institutions.
These heavy unrealized losses originated in the bond portfolios held by the banks. With the rise in interest rates orchestrated by the Federal Reserve since 2022 to curb galloping inflation, the value of these securities, particularly residential mortgages, has depreciated significantly.
An accounting phenomenon which, although not materialized, weighs heavily on the weakened balance sheets of the institutions concerned.
Threat of a repeat of 2023?
Beyond the worrying figures, it’s the threat of a repeat of the traumatic events of 2023 that has authorities and investors alike worried.
Last year, the cascading bankruptcies of several banks had shaken savers’ confidence, leading to massive deposit withdrawals. A scenario that regulators are desperately trying to avoid, aware of the devastating collateral damage that the real economy could suffer.
Among the institutions most at risk are many regional banks, weakened by the end of the Fed last March. Deprived of this safety net, these institutions are struggling to cope with the pressure exerted by the high interest rate environment.
In this period of financial turmoil, investors may well find refuge in the crypto universe. This hypothesis makes perfect sense given the recent surge in prices, with bitcoin breaking the symbolic $70,000 barrier.
As a journalist at Coinpri, I’ve been captivated by the world of bitcoin and blockchain since 2020. The decentralized aspect of Bitcoin particularly piqued my interest. Since then, I’ve been working constantly to spread my knowledge, hoping one day to see a world where everyone fully enjoys their financial freedom.
