Traditional Finance in Crisis: The Quiet Rise of Minimalism

In recent years, the financial market has been severely hit by aggressive interest rate hikes in the United States. Amidst rapid interest rate hikes this March, many banks crashed overnight, including Silicon Valley Bank and First Republic Bank. The traditional finance sector, which seems to steadily develop, has suffered numerous issues as time goes by, yet meanwhile, minimalism has been on the quiet rise in the crypto industry.

Vulnerabilities in Traditional Finance

Banks have always been at the center of traditional finance, but the frequent collapses early this year reveal the fragility of the entire banking industry. During an economic slowdown, a lack of confidence among startups leads to difficulties in financing and a decrease in deposits, and massive withdrawals put banks at risk of a run. With insufficient cash flow, banks are forced to sell the bonds they hold. What’s worse, frequent interest rate hikes have resulted in an inverted yield curve for U.S. bonds and a drop in bond prices. As a result, banks suffer losses, and the risk of a run is exacerbated. This is also a significant reason why well-regarded Silicon Valley Bank, one of the top twenty banks in the U.S., was forced to close overnight.

Although Silicon Valley Bank was acquired by First Citizens Bank and the FDIC attempted to minimize the losses suffered by customers in the event of bank failures, this protection may focus on the interests of domestic depositors in the U.S. only. Recently, several customers of Silicon Valley Bank’s Cayman Islands branch have reported that their funds were transferred to the FDIC, implying that their deposits have been seized, but they still need to repay loans to First Citizens Bank. As former FDIC executive Joseph Lynyak pointed out, overseas customers of Silicon Valley Bank are facing double troubles, losing their deposits while still repaying loans.

The Sword of Damocles Hanging over Global Finance: U.S. Debt Default

A series of bank failures in the United States may appear to have been resolved smoothly, but the actual losses incurred are immeasurable. The same is true for the U.S. debt default this May. Although the U.S. government temporarily suspended the debt ceiling to avoid default, the U.S. debt continued to soar. According to the data from the U.S. Department of the Treasury, the national federal debt surpassed $32 trillion for the first time on June 15, nine years sooner than pre-pandemic forecasts had projected.

The soaring U.S. debt has raised concerns about the looming threat of a “U.S. debt default”, which could be likened to the sword of Damocles. While the U.S. government may be able to suspend the crisis by raising the debt ceiling, such actions will not solve the problem once and for all. Once the U.S. debt default occurs, with the increasing amount of debt, it will have a growing impact on the global economy and financial industry, leading to a serious global financial crisis.

Rise of Minimalism amid the Crisis

Following the 2008 global financial crisis, the world’s first crypto Bitcoin was proposed. The traditional financial sector used to disdain the crypto industry. As cryptos have achieved record-breaking market capitalization and showcased immense resilience and innovation over the past decade, Wall Street giants have come to acknowledge their value and future potential.

Cryptos and traditional finance go their separate ways. Traditional finance often prioritizes serving the elite class and customers from the U.S., presenting itself as a “high-end industry”. In fact, it often erects barriers to entry and reinforces monopolies, creating class divisions that exclude a significant portion of users while safeguarding the interests of a privileged few. Consequently, this exacerbates the concentration of wealth so that “the richest 1% own almost 99% of the world’s wealth”.

Cryptos advocate decentralization and equality. They fill the gaps left by traditional online payment systems, enabling easy access to crypto transactions. In places where ordinary people struggle with high inflation rates of fiat currencies, cryptos will come in handy. Moreover, ordinary investors who are unable to participate in primary markets can directly invest in the crypto market.

With the principle of equality, minimalism highlights the core of the crypto spirit. The crypto space strives to create a minimalist environment to reduce the barrier to entry and eliminate information asymmetry, thus breaking class barriers. As a global crypto exchange, CoinEx is committed to “Making Crypto Trading Easier”. With easy-to-use product design, simple investment operations and considerate customer services, CoinEx respects all ordinary users, reduces their workload, and meets their real demands. By doing so, CoinEx makes it easy for every investor to get started with crypto trading. In the crypto world where everyone is free and equal, 99% of individuals have the potential to become the richest 1%.

During periods of economic slowdown, the limitations of traditional finance become increasingly evident. Traditional finance and monetary policies have long functioned as tools for the benefit of the privileged few. In times of financial crises, it is often the ordinary people who suffer the most. Unable to effectively manage risks through investments, they may even face substantial losses in assets due to fiat devaluation or bank failures. The current financial system has been a far cry from “inclusive finance”. To indeed help the majority of investors, minimalism advocates lowering the barrier to the crypto world and offering all people a new opportunity to improve their social and economic standing.