The number of Bitcoin transactions hit a record high on the day the US government secretly proceeded to bail out banks[Column]| coindesk JAPAN | Coindesk Japan

On April 30th, while the U.S. government was secretly working out a bailout plan with two banks, the Bitcoin network hit a record number of transactions per day. It is the highest number of confirmed trades in its 14-year history, surpassing the previous record set during the 2017 bull market. The following day, May 1, First Republic Bank was placed under public control, after which JPMorgan Chase acquired its deposits and assets. It was the second largest bank failure in American history.

coincidence

The two events of increasing use of Bitcoin and the latest disaster in the US financial industry are not exactly related. But this timing coincidence suggests something about the future of the crypto industry and the potential of Bitcoin (BTC) in an increasingly dysfunctional economy. As regulators and politicians work to block the penetration of crypto assets into the broader economy, the private banking sector is exposing the fact that it cannot fend for itself.

After weeks of uncertainty and a slump in the stock price, First Republic Bank was transferred to the Federal Deposit Insurance Corporation (FDIC). The move was to prevent a run on the bank, its growing impact, and the potential risk of depleting the FDIC’s reserves.

The FDIC immediately sold “all of[First Republic Bank’s]deposits and substantially all of its assets” to JPMorgan Chase & Co. JPMorgan also received a $50 billion loan to complete the transaction. Democrats will likely object to the deal, which was reportedly rushed together before the market opened on Monday.

“The government called on us and other banks to cooperate, so we did,” JPMorgan CEO Jamie Dimon said. He is known as one of the most prominent blockchain proponents and longtime critic of Bitcoin.

part of a big move

The failure of First Republic Bank is the second largest in history after Washington Mutual, which went bankrupt during the 2008 global financial crisis, which also triggered the birth of Bitcoin. First Republic Bank’s management has some responsibility, but its failure was at least partly due to the interest rate hikes and the Federal Economists generally agree that hawkish monetary policy by the Fed is to blame.

What makes this situation particularly relevant to Bitcoin is that it is part of a broader political realignment toward populism in the crypto industry. Crypto assets are not the only movement to challenge the authority and vested interests of central banks. Many will see the First Republic Bank bailout as another example of profits being shifted to some private companies and losses being passed on to society.

In order to avoid a significant reduction in the FDIC’s reserves, politicians have effectively said that all American banks are too big to fail. This is a kind of moral dilemma that protects a certain class of people from the consequences of their decisions.

Bitcoin has emerged as an alternative currency system, and many believe that Bitcoin could eventually become a global reserve currency like the current US dollar. Bitcoin is attractive to some because it follows pre-determined rules, including a fixed issuance schedule determined by social consensus (unlike the political or financial interests that control the US dollar). reflected.

The freedom of open source

Bitcoin price rose steadily during the last series of bank failures. It may rise again this time. That doesn’t mean Bitcoin is a “hedge” against financial turmoil, or that people are choosing a “trustless” financial system over increasingly distrustful banks.

The timing of the Bitcoin blockchain reaching this milestone is purely coincidental. The number of Bitcoin transactions has increased since the launch of Bitcoin Ordinals, when Bitcoin became NFT-enabled.

According to Glassnode data cited by digital asset media Blockworks, 2.39 million Ordinals (= Bitcoin NFTs) have been created so far. However, while Bitcoin NFTs currently account for about half of all transactions on the Bitcoin network, not all Bitcoiners see NFT support as a valuable feature.

There are many bitcoin purists who stick to their currency use and consider NFTs to be trivial. But sorry, Bitcoin is an open source network. In other words, people are free to use this technology as they please. If Bitcoin has a role to play in the future global economy, it will only do so if people have the freedom to spend it as they please.

｜Translation and editing: Akiko Yamaguchi, Takayuki Masuda
｜Image: Shutterstock
｜Original: Bitcoin Set New Record of Daily Transactions the Same Day the US Government Quietly Engineered a Bank Buyout