BANK TAKEOVER SHAKES CRYPTO WORLD 

The recent takeover of First Republic Bank by JP Morgan has generated uncertainty in the crypto markets. Some argue that the second-largest US bank failure ever indicates a worsening crisis, which could potentially benefit cryptocurrencies. Others believe the successful navigation of this challenge by the banking system demonstrates stability. The situation remains unclear, with various headwinds facing the crypto market, such as the ongoing regulatory crackdown in the US and the 25-basis point hike in US interest rates.

First Republic Bank and the Wider Banking System

JP Morgan’s acquisition of the struggling First Republic Bank has not been attributed to cryptocurrencies, despite the bank’s share price plummeting. Analyst Edward Moya believes Wall Street is gaining confidence that the wider banking risk has been “removed from the table.” He added, “It is looking like the U.S. banking system has a playbook to deal with the next banking crisis when it emerges, which is somewhat dampening the case for cryptos.” However, CIO at JP Morgan Asset Management, Bob Michele, considers the current situation a “crisis” and is concerned that regional banks are being propped up by government loan programs.

In today’s Ainslie Bullion article, we covered this topic in more depth, but the short version is: with insufficient GDP growth to cover interest payments on debt, central bank balance sheets grow, leading to fiat currency devaluation. The majority of the population bears the brunt of these debt payments and bailouts, while a few assets, like gold, silver, and crypto, consistently outperform this debasement. To avoid paying for the system’s losses and becoming poorer, individuals should invest in assets that consistently outperform the debasement of fiat currencies. With the potential for more bank failures and a possible Fed default due to the current US debt ceiling, it is crucial to balance your wealth in an unbalanced world.

Prospects of US Crypto Legislation

The US House Financial Services Committee is pushing to introduce comprehensive crypto legislation, according to chair Patrick McHenry. He believes a bill could be signed by President Joe Biden within 12 months, with a “deal out” planned for the next two months. Joint hearings will be held in May. The recent passing of MICA laws in Europe and Hong Kong’s embrace of crypto may finally prompt action on this issue. In the UK, a consultation on a comprehensive crypto assets regulatory framework has concluded, with industry participants welcoming aspects of the proposals and calling for refinements.

Staking Surpasses DEXs in Total Value Locked: A Sign of Market Health and Maturity

The recent milestone of total value locked (TVL) in crypto staking platforms surpassing that of decentralised exchanges (DEXs) is a positive sign for the overall health and maturity of the digital asset market. According to data from DeFi Llama, liquid staking contracts now hold $17.47 billion in crypto, edging out the $17.2 billion locked in DEXs. The bulk of these staked funds are in Ethereum, as the network continues its transition to the proof of stake (PoS) consensus mechanism.

There are several reasons why this development is beneficial for the market:

1. Enhanced Network Security: Staking platforms play a crucial role in maintaining the security and stability of PoS-based networks like Ethereum. By locking in more value, these platforms are better equipped to protect the network against malicious actors, ensuring its long-term resilience.
2. Incentivised Participation: The rise in TVL in staking platforms also indicates that more users are actively participating in the ecosystem. This increased involvement not only fosters network security but also contributes to a more decentralised and robust financial infrastructure.
3. Long-term Investment Focus: Staking typically requires investors to lock their assets for a certain period, signalling a longer-term investment horizon. This shift away from short-term speculative trading, as seen in DEXs, could contribute to a more stable and mature market environment.
4. Sustainable Yield Generation: Staking provides investors with an alternative source of passive income through yield generation. As more value is locked in staking platforms, the market could see an increase in sustainable income opportunities, attracting new investors and further supporting market growth.
5. Market Confidence: The growing TVL in staking platforms may also reflect increasing market confidence in the future of PoS networks and the broader crypto ecosystem. As this confidence grows, the market could witness enhanced liquidity, more significant adoption, and a more stable pricing environment.

In conclusion, the recent JP Morgan takeover of First Republic Bank has left the crypto markets in a state of uncertainty, with potential implications for cryptocurrencies, banking stability, and the prospect of new US crypto legislation. As the financial landscape continues to evolve, investors should consider diversifying their portfolios with assets like gold, silver, and crypto to weather the storm. The surge in total value locked in staking platforms also signifies a maturing market, highlighting the growing importance of a balanced investment strategy in an increasingly unbalanced world.