The cryptocurrency community is elated to see the price of Bitcoin hit the roof. But the scene isn’t so rosy for many Italian investors who decided to trust the country’s fiat economy and invest in one of the country’s leading banking institutions— Monte dei Paschi.
Italy has been going through a rough patch since the past few years. The country’s failing economy has gotten much worse lately and the recent referendum for the constitutional amendment wasn’t of much help either. As the situation worsens, Monte dei Paschi failed to raise the required funds through private investors before the government’s recapitalization deadline. This means the government will have to bailout the ailing institution by infusing a capital of more than 5 billion euros soon.
While the Italian government is willing to issue a bailout package, the European Union rules prevent it from doing so without hurting hundreds if not thousands of small time retail investors. According to reports, over 2-billion-euro worth of Monte dei Paschi bonds are with small, retail investors and if the government decides to rescue the bank, these investors can’t be compensated according to EU rules that prevent taxpayers from bearing the burden of rescuing the banks.
The new Italian prime minister believes that if Monte dei Paschi is allowed to fail, then the country’s banking sector will recede into a huge turmoil. While the government has bailed out few smaller banks in the past, at the cost of shareholders and investors’ money, this is a huge deal as Monte dei Paschi is much bigger than them all.
The effects of Italian economic situation are being felt in the cryptocurrency industry as well. The decreasing confidence among the traders and investors in the country’s economy is driving them towards alternative investment options like Bitcoin. The constantly increasing demand for Bitcoin has got the cryptocurrency’s price to rise over $850 mark and the trend is expected to continue into the future as well.
Ref: BBC | Image: Shutterstock