In less than a week, three banks lost their lives: Silvergate, Silicon Valley Bank (SVB) and Signature Bank. These failed banks were also intertwined with the crypto sector, as a large part of the investments went through these banks.
In the midst of all the financial turmoil, after initially continuing its correction, bitcoin (BTC) skyrocketed. Naturally, the king of cryptocurrencies took the rest of the crypto market with him. Data from Glassnode also shows that self custody of bitcoin and ethereum (ETH) has surged in the past week due to all the concerns surrounding the banking sector.
BTC and ETH in-house
By using a self-custodial wallet you have the private keys in control. With this you are really the actual owner of your bitcoin and/or ethereum. There is no service provider or third party involved and transactions go directly from you to the recipient. You are, as it were, your own bank.
When you choose to store your bitcoin at a crypto exchange, you will not own the private keys. Bearing in mind the well-known saying within the crypto world, “not your keys, not your crypto”the crypto exchange is in principle the owner of ‘your’ crypto.
When news of the SVB broke, investors took refuge in bitcoin and ethereum, with notable outflows on exchanges. About 0.144% of all BTC and 0.325% of all ETH in circulation were withdrawn from crypto exchanges. We saw a similar development with the collapse of crypto exchange FTX: people are being reminded en masse that being your own bank is the best option.
Bitcoin in response to the financial crisis
The current banking drama is exactly why Bitcoin was created in 2008. The white paper of Bitcoin was released by Satoshi Nakamoto six weeks after the collapse of the Lehman Brothers in 2008. The CEO of hardware wallet manufacturer Trezor, Josef Tětek, said that bank failures are a clear reminder of why we need bitcoin.