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JPMorgan Chase's acquisition of First Republic, the second-largest bank failure in U.S. history, coincided with the Bitcoin network processing a record number of daily transactions on Sunday, surpassing its 2017 peak.
While the two events are not directly linked, the timing suggests the possibility of Bitcoin playing a role in an increasingly dysfunctional economy. As regulators attempt to limit the crypto industry's impact on the wider economy, the private banking sector's failure to manage itself has resulted in government intervention.
After weeks of uncertainty, the Federal Deposit Insurance Corporation (FDIC) took over First Republic to prevent a bank run and a drawdown of the insurance fund's reserves. JPMorgan Chase, the largest U.S. bank, acquired the bank's deposits and assets for $50 billion.
Although JPMorgan CEO Jamie Dimon is known for his criticism of Bitcoin, the cryptocurrency industry aligns with the wider political realignment towards populism that challenges central banks and established powers.
In addition, Bitcoin has emerged as an alternative monetary system that could potentially serve as a legitimate global reserve currency like the U.S. dollar, as it follows prewritten rules and has a fixed monetary issuance schedule set by social consensus.
Bitcoin's price rose during the last cycle of banking failures and might catch a wave up this time, but this does not mean that it is a "hedge" against financial calamity or that people are choosing "trustless" financial systems over increasingly untrustworthy banks.
Moreover, Democratic politicians are expected to challenge the sale of First Republic, which was reportedly rushed through to close before markets opened on Monday.
The latest financial rescue plan being engineered by the U.S. government and major banks suggests a growing dysfunction in the traditional banking sector, while the surging use of the Bitcoin network highlights the potential for cryptocurrencies to disrupt the existing financial system.
As regulators and legislators continue to work towards reducing the impact of cryptocurrencies on the wider economy, the private banking sector is struggling to manage itself.
Furthermore, the recent failure of First Republic, which was acquired by JPMorgan Chase after its assets were seized by regulators, is the second-largest bank failure in U.S. history after Washington Mutual during the Great Financial Crisis. The failure of First Republic is believed to be partially due to rising interest rates and the hawkish monetary policy of the Federal Reserve, which also caused the collapse of Silvergate, Silicon Valley, and Signature banks earlier this year.
This aligns with the emergence of the cryptocurrency industry as part of a wider political shift towards populism, challenging the authority of central banks and established powers.
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