The Crisis of Traditional Finance: The Silent Rise of Minimalism

In recent years, the financial market has been severely affected by aggressive interest rate increases in the US. Amid the rapid rate hikes this March, many banks, including Silicon Valley Bank and First Republic Bank, went bankrupt overnight. While the traditional financial sector, which is thought to have made a steady development, has been experiencing numerous problems as time passed, minimalism in the crypto industry has been on the rise in silence.

Vulnerabilities in Traditional Finance

While banks have always been at the center of traditional finance, frequent bankruptcies earlier this year reveal the fragility of the entire banking sector. During a recession, a lack of trust among startups causes difficulties in financing and dwindling deposits, and large withdrawals put banks at risk of flight.

With insufficient cash flow, banks are forced to sell their bonds. Worse still, frequent rate hikes have caused the yield curve on US bonds to invert and bond prices to fall.

As a result, banks suffer losses and the risk of escape increases. This is also a major reason why the esteemed Silicon Valley Bank, one of the twenty largest banks in the US, had to close overnight.

Despite the acquisition of Silicon Valley Bank by First Citizens Bank and the FDIC’s efforts to minimize customer losses in the event of bank failures, this protection can only focus on the interests of local US depositors. Recently, several customers of Silicon Valley Bank’s Cayman Islands branch reported that their funds were transferred to the FDIC, implying that their deposits were confiscated but they still need to repay the loan to First Citizens Bank. As former FDIC executive Joseph Lynyak pointed out, Silicon Valley Bank’s overseas clients face the double problem of losing their deposits while paying back their debts.

Damocles’ Blade Swings on Global Finance: US Debt Default

A series of bankruptcies in the United States may seem to have resolved smoothly, but the actual losses incurred are immeasurable. The same goes for the US debt default this May. Although the US government temporarily suspended the debt ceiling to avoid default, US debt continued to rise. The national federal debt exceeded $32 trillion for the first time on June 15, nine years earlier than pre-pandemic estimates predicted, according to data from the U.S. Department of the Treasury.

Rising US debt has raised concerns about the threat of US insolvency. It is likened to the sword of Damocles. The US government can suspend the crisis by raising the debt ceiling, but such actions will not definitively solve the problem. When the US debt default occurs, it will have an increasing impact on the global economy and financial sector, along with the increasing amount of debt, leading to a severe global financial crisis.

The Rise of Minimalism Amid the Crisis

Following the 2008 global financial crisis, the world’s first crypto Bitcoin was proposed. The traditional financial industry has been underestimating the crypto industry. As cryptocurrencies have achieved record market capitalization over the past decade and have demonstrated tremendous resilience and innovation, Wall Street giants have come to recognize their value and future potential.

Cryptos and traditional finance are going their separate ways. Traditional finance often prioritizes serving the elite and customers in the US and presents itself as a “top-of-the-line industry”. In fact, it often establishes barriers to entry and strengthens monopolies, maintaining class distinctions that exclude a significant portion of users while protecting the interests of a privileged few. As a result, this exacerbates wealth concentration, such that “the richest 1% owns almost 99% of the world’s wealth”.

Cryptos advocate decentralization and equality. They provide easy access to crypto transactions by filling in the gaps left by traditional online payment systems. Where ordinary people’s fiat currencies are grappling with high inflation rates, cryptocurrencies will work. Also, ordinary investors who cannot participate in the primary markets can invest directly in the crypto market.

With the principle of equality, minimalism highlights the essence of the crypto spirit. The crypto space strives to create a minimalist environment to reduce the barrier to entry and eliminate information asymmetry, thus overcoming class barriers. As a global crypto exchange, CoinEx is committed to “Easy Crypto Transactions”. CoinEx respects all ordinary users, reduces their workload and meets their real demands with its easy-to-use product design, simple investment processes and thoughtful customer service. By doing this, CoinEx makes it easy for every trader to start crypto trading. In the crypto world where everyone is free and equal, 99% of individuals have the potential to be the richest 1%.

In times of economic slowdown, the limitations of traditional finance become more and more evident. Traditional financial and monetary policies have long functioned as tools for the benefit of a privileged few. In times of financial crisis, it is often ordinary people who suffer the most.

Because they cannot effectively manage risks through investments, they may even face significant losses in assets due to fiat devaluation or bank bankruptcies. The current financial system is far from “inclusive finance”. To truly help most investors, minimalism advocates lowering barriers to the crypto world and providing a new opportunity for all people to improve their social and economic situation.

About CoinEx

Founded in 2017, CoinEx is a global cryptocurrency exchange dedicated to facilitating transactions. The platform offers a range of services, including spot, margin and futures, swaps, automated market maker (AMM) and financial management services to over 5 million users in over 200 countries and territories. Originally founded with the intention of creating an equal and respectful cryptocurrency environment, CoinEx is dedicated to breaking down traditional finance barriers by providing easy-to-use products and services to make cryptocurrency transactions accessible to everyone.