Brad’s Note: Today, the Federal Reserve announced it’s pressing on and raising interest rates by another 0.25 points amid the current banking crisis.
While this shouldn’t impact our sleep well at night (SWAN) investment strategy, there are quite a few areas of market that will be affected. And there’s one sector that’s gearing up for a crisis of its own.
If you have a position – or are interested – in the crypto market, pay special attention to the message below from my colleague and crypto expert, Teeka Tiwari.
Now, my analysts and I don’t follow or recommend crypto at Wide Moat Research. But we understand some readers might take small, speculative stakes in the sector. And Teeka and I both agree: You want to be cautious before buying any crypto in this market.
There is a storm brewing in the crypto market that Teeka is referring to as the Crypto Panic of 2023. And you don’t want to be caught off guard.
Read below to find out how it’s linked to the Fed’s decisions and even the banking system, and how this panic could affect you, too…
By Teeka Tiwari, Editor, Palm Beach Research
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The last time I felt this uneasy about the markets was nearly 16 years ago…
It was a devastating time. It was so terrible, people wondered if we’d ever come through to the other side.
I’m talking about the Great Financial Crisis of 2007–2009.
In October 2007, the S&P 500 hit new highs after an epic 101% run from the 2000 dot-com-bust lows.
But Wall Street got greedy. It started taking outlandish risks. Firms like Lehman Brothers were using leverage as high as 31–1.
Many of Wall Street’s trades involved low-quality assets masquerading as high-quality assets. Somehow Wall Street had convinced the rating agencies to give subprime loans (loans made to the riskiest borrowers) AAA ratings.
So when Wall Street treated these risky assets as safe, AAA-rated assets, it led to disaster.
When the subprime loans unraveled, the S&P 500 dropped 57.6% from its all-time high in October 2007 to its trough in March 2009.
The first domino to fall during that crisis was global investment firm Bear Stearns.
In early 2007, it had a $20 billion market cap and traded for $171. Less than a year later, the company narrowly avoided bankruptcy when JPMorgan Chase swooped in and bought it for $10 per share – a 94% discount on its share price a year prior.
At the time, I was running my own hedge fund. I remember thinking, “This isn’t over. Bear Stearns is massive. There’s no way more dominoes won’t fall.”
It took some time, but that’s exactly what happened…
In September 2008, we saw the granddaddy of all bankruptcies occur with Lehman Brothers.
The 158-year-old firm had a record $613 billion in debt when it filed for bankruptcy on September 15, 2008. But the sell-off was far from over.
Washington Mutual collapsed… then Wachovia… then National City Bank… And more market carnage ensued.
Here’s why I’m telling you this: I think we’re about to see a similar crisis unfold soon…
The Dominoes Are Falling Again
As I mentioned above, we’re in the biggest banking crisis since 2008.
It started earlier this month when regulators shut down Silicon Valley Bank, Silvergate Bank, and Signature Bank. They’re the largest banking collapses since Washington Mutual went belly up in 2008.
The following week, global giant Credit Suisse nearly buckled under. Over the weekend, rival Swiss bank UBS announced a $3.2 billion takeover of Credit Suisse.
Meanwhile, the contagion continues to spread…
Last Thursday, First Republic Bank almost went under. Its shares plunged as much as 73% in one week.
A coalition of 11 major banks – including JPMorgan Chase, Citigroup, Bank of America, Wells Fargo, and Goldman Sachs – deposited $30 billion into First Republic as a show of faith to help reverse the bank run.
Despite the lifeline, the NYSE briefly halted trading of First Republic’s shares. When trading resumed, they continued to crumble.
Unlike the 2008 crisis – which was caused by toxic subprime loans – this crisis stems from the Federal Reserve.
As I wrote on Monday, the Fed’s hawkish policy of raising interest rates to bring down inflation has hammered the value of long-duration bonds.
Banks own hundreds of billions of dollars’ worth of these long-term bonds.
Today, according to the Fed’s website, U.S. banks are sitting on over $600 billion in losses on their bond portfolios.
(By comparison, at the beginning of the financial crisis in March 2007, U.S. banks had $1.3 trillion in outstanding subprime mortgages.)
This crisis will continue to crush traditional bank stock prices.
Even if a financial miracle occurs, and the Fed gets this bank run under control… It will severely crimp future bank earnings as regulators force a whole host of new capital requirements and compliance costs upon the banking system.
And yet throughout all this turmoil, bitcoin has continued thriving…
Is Bitcoin Becoming the “New Bank”?
With bank runs happening across the globe, many people are turning to crypto.
It’s been on an absolute tear. BTC is up 41% since the banking system started to buckle. Other altcoins are up even more.
Over the past few weeks, I’ve spoken to a lot of wealthy folks. And they tell me they’re starting to move some of their money from banks to crypto.
The beauty of bitcoin is you hold it. Nobody can take it from you.
Bitcoin is no one else’s liability. As long as you custody your own bitcoin, it’s free of counterparty risk. In addition to that, it’s impossible to dilute bitcoin’s value beyond its preprogrammed creation schedule.
Sure, bitcoin is volatile. And yes, you might wake up one morning and see it down 30%, 40%, or even 50%.
But bitcoin always comes roaring back (like we’re seeing now). After every bone-crushing crash, it always powers back to new all-time highs.
People are realizing it’s better to deal with volatility than the risk of a 100% loss that currently exists in the fiat-based banking system. That’s why I believe bitcoin will continue rising from here.
Just think about it…
Only about 2 million BTC actively trades every day. That’s just $56 billion. That’s a spit in the ocean compared to the total estimated global wealth of $463 TRILLION.
Think about it…
How many rich people do you think are re-examining the value proposition of bitcoin right now? I can tell you a rich man’s biggest fear is becoming a poor man.
What if the Crypto Kids Are Right?
The world’s wealthy are scared. And they should be…
There are no safe havens inside of the traditional banking system. Logic and self-preservation dictate that they must look outside of the system to help preserve their wealth.
They must be asking themselves: “What if there’s a 1% chance the crypto kids are right, and bitcoin becomes the world’s reserve currency, and I miss it?”
If you’re wealthy, you can’t take that risk. You have to allocate something just in case you’re wrong about the traditional financial system.
If they allocate just a tiny percentage of their net worth to BTC – 1% or 2% – that could send over $1 trillion heading into bitcoin.
The FDIC insures up to $250,000 in bank accounts. But these wealthy people have hundreds of millions of dollars in their accounts.
What happens if a bank collapses, and the government doesn’t come to their rescue?
Again, as a wealthy person, you’ve got hundreds of millions of dollars in the banking system. Why not take 1% of your net worth and throw it into bitcoin?
Sure, they may think bitcoin could be a scam. But what if – as I believe – it’s actually the real deal?
Would you rather take an IOU from the bank and wait in line while the feds try to recover your millions – or have an asset that you own and that’s in your custody?
Friends, I believe the wealthy are waking up to this reality.
As I said above, there’s only about 2 million BTC actively trading each day – or about $56 billion worth.
According to Statista, there’s $183 trillion worth of deposits in the global banking system.
Again, you only need a tiny fraction of that to go into bitcoin, and it will go to all-time highs.
So you can see why I’m so bullish.
However… While bitcoin is set to be a huge beneficiary of this turmoil… And I expect it to go much higher from here…
It’s not yet the right time to buy into the broad crypto market.
The Banking Panic Will Lead to a Crypto Panic
There’s a panic coming to crypto like we’ve never seen before. In fact, this could be the biggest crypto panic I’ve seen in my seven years following this space.
This warning is based on my research.
I’ve personally met the crypto billionaire who’s pulling the trigger. His developers have confirmed this could happen as early as by the end of this month.
I believe it’ll catch millions of Americans by surprise. By the time they realize what’s happening, it’s going to be too late.
Many Americans are using this rally to speculate in meme coins and a bunch of other fraudulent projects. This coming panic will wipe them out…
But not in a way you’ve ever seen before.
The big mistake everyone is making is they think the entire crypto space will have an explosive rally… AND THEY ARE HORRIBLY WRONG.
Just a tiny fraction of the crypto market will benefit. And if you don’t own these coins, you’ll get crushed… While a small group of better-informed investors will make a killing.
To prepare you for this coming panic, I’ve put together a special briefing on Tonight at 8 p.m. ET. It’s called The Crypto Panic of 2023.
During this briefing, I’ll explain exactly what will cause this panic – and how you could potentially turn $1,000 into an entire nest egg… All while getting paid each month.
And as a special bonus for those who attend, I’ll even give away my top pick to play the coming panic.
You should know my past free picks have an average peak gain of more than 1,300%.
Just click here to register, and your email address will automatically be added to my RSVP list.
Friends, we’re seeing the biggest banking panic sense the 2008 Financial Crisis. And if you make the wrong move, it could be among the worst financial mistakes of your life.
Before you make any moves… I want you join me on tonight at 8 p.m. ET. So click here so you can automatically add your email address to my RSVP list.
Let the Game Come to You!
Big T (Teeka Tiwari)
Editor, Palm Beach Research Group