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Bitcoin Leaves Banking Stocks In The Dust As IMF Warns Banks Are In For Major Losses

Bitcoin 2020/05/23 23:57 by Edwin Kinoti
Bitcoin Leaves Banking Stocks In The Dust As IMF Warns Banks Are In For Major Losses

The financial crisis exposed by the Covid-19 pandemic has worsened financial vulnerabilities across the world. A new report from the IMF has shown three potential weak spots that can amplify the financial conditions, causing more instability or a worsened financial crisis. These are risky segments in global credit markets, emerging markets, and banks.

This situation has led to the demand for cash, triggering selling pressures, and large outflows of mutual funds. For instance, since the pandemic, emerging markets have recorded capital outflows of over $100 billion. In addition, banks have been affected by low-interest rates, which puts a lot of pressure on their profitability.

Such challenges affect financial stability, as banks play a key role in a dynamic economy. When banks cannot generate profits, they are faced with challenge of providing loans and financial services, denying the economy crucial credit.

The pandemic could cause banks to increase fee income to alleviate pressure on profits. Banks that take excessive risks to recoup profit might have bigger losses in the future. Regardless of the steps banks take, the need to strategize to reduce oncoming losses is apparent, as all sectors have been hit by the pandemic.

Bitcoin Soars

Amidst the challenges and losses facing banks and financial institutions, Bitcoin has seen an upward trajectory, outperforming banking stocks, which is predicted to continue in the coming weeks. The world’s turmoil has not had any major negative impact on the price of BTC, or its popularity, as the season has seen major milestones for the cryptocurrency.

One of these is the Bitcoin Halving that had the blockchain community anticipate the exact day and hour, as well as major predictions on price changes made. Through this event, the price was affected positively, with new active addresses as well as an increase in trading volumes.

The looming economic crisis has driven many people to seek other safer investment opportunities that are better than banks at keeping the value of their investments afloat. This has led to more people using Bitcoin as an investment tool and abandoning banks, which are currently begetting pressure.

BTC’s price is up above $9k, which is a first in many months, as it had stabilized at $7k for a while before the coronavirus outbreak. The increased value of BTC indicates that it has not faced the same woes that banks are currently experiencing, and that it might be one of the few markets not negatively affected by the pandemic.

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