Coronavirus revealed holes in traditional financial systems, what will fill them up?

coronavirus, banks

The coronavirus pandemic and subsequent lockdowns to contain the disease have created an unprecedented economic scenario.

Central banks around the world, led by the U.S. Federal Reserve, have pumped unprecedented stimulus measures into the system in the wake of the coronavirus pandemic, far outpacing the response to the 2008 global financial crisis and adding trillions of dollars to central bank balance sheets.

Now, as the world braces for the economic fallout from widespread coronavirus lockdowns, a hedge fund manager has warned of “holes within traditional financial systems”. American Congress has allocated almost $3 trillion for coronavirus-related economic aid and the Fed has pumped trillions of dollars into the U.S. economy to soften the fallout from the coronavirus pandemic—with more on the way.

Evolution of Finance

“The evolution of finance is only happening faster in the wake of the current global economic crisis, which has illuminated holes within traditional financial systems that can potentially be filled by bitcoin,” said Olaf Carlson-Wee, founder of hedge fund Polychain Capital.

“The surging activity we’ve seen since the beginning of 2020 has been in part inspired by the Federal Reserve’s unprecedented monetary intervention,” said River chief executive and co-founder Alex Leishman, who added growing interest in bitcoin from “seasoned macro investors” like Paul Tudor Jones, Dan Tapiero and Raoul Pal is legitimizing bitcoin “within the mainstream finance community.”

Traditional financial institutions are buying bitcoins

Alongside high-profile investors who have taken an interest in bitcoin, the traditional financial industry has also been slowly coming around to cryptocurrencies.

JPMorgan, which has been described as bitcoin’s “biggest enemy” and whose chief executive once called bitcoin a “fraud,” has recently added its first crypto exchange customers.

Wall Streets biggest banks are very much playing catch up, however.

River has recently rolled out a private client service for investors who want to purchase up to $250 million worth of Bitcoin.

“We believe that bitcoin will play a key role in the world’s monetary systems over the coming years, and incumbent institutions are not culturally or technologically prepared for this future,” said Andrew Benson, River co-founder and chief operating officer.

Conclusion

Bitcoin proved over the past ten years that it is not going to burst like a bubble, as wall street predicted it to. Quite on the contrary, it was the best performing asset of the decade and that was before the coronavirus. Some predict that Bitcoin will end 2020 as one of the year’s best performing assets again. Bitcoin is however not the only cryptocurrency available for investors.

Source: Forbes.com

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