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| What Doesn't Kill Crypto Makes It Stronger |  | By Ian King
Editor, Strategic Fortunes |
Dear Winning Investor, Before the Federal Reserve’s creation in 1913, bank runs in the U.S. occurred every five to seven years.
They happened so frequently that it was like the national pastime before we invented baseball.
In the 19th century, Americans would rush to the bank to retrieve their cash, fearing that the bank’s unpaid loans would render it insolvent.
As lines grew outside the bank, the bankers would sometimes stack cash up in the windows in an attempt to quell the panic and show depositors that their cash was safe.
Ironically, it was actually the run itself that would cause the bank to go under, driven by customers’ fear of its insolvency.
In other words, bank runs are a self-fulfilling prophecy.
In a fractional reserve banking system, the bank only reserves around 10% of its loans.
That means if everyone tries to obtain their cash simultaneously, there usually isn’t enough available to make depositors whole.
But as long as people have reason to believe their cash is safe, there won’t be a bank run.
We don’t have retail bank runs like the days of yore, primarily due to the Fed as a buyer of last resort and FDIC insurance.
However, we still have institutional bank runs, as we saw during the 2008 financial crisis when Lehman Brothers went under.
Banks are now required to hold more reserves, and that’s kept faith in the system.
That’s how the traditional finance sector avoids systemic risk.
On the contrary, crypto has no central bank.
It rejects the idea that there can be one central entity controlling the monetary supply.
This week, we saw the first “crypto bank run.”
And it looks like this experimental protocol might have passed the test.
 | America’s No. 1 crypto expert, whose crypto trades have soared as high as 1,061% ... 1,934% ... and 18,325% — all in less than a year, says: “Bitcoin’s best days are behind us… And one ‘Next Gen Coin’ is going to take center stage.” Get the full story here. |
 
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