Bankless The U.S. Banking System, Federal Reserve, & USDC Post-SVB Collapse with Ram Ahluwalia
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Mar 15, 2023 Ram Ahluwalia, CEO of Lumida Wealth Management and a digital asset investment expert, shares his insights on the recent collapse of Silicon Valley Bank. He discusses the vulnerabilities of the banking system, the implications for USDC, and the potential targeting of crypto. Ram also explores how decentralized finance (DeFi) might have provided solutions, raises questions about interest rates, and assesses the future of smaller banks amidst rising economic pressures. His keen analysis offers a clear view of a rapidly shifting financial landscape.
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Fractional Reserve Banking
- Banks operate on fractional reserves, borrowing short and lending long.
- They perform a 'financial alchemy' relying on public confidence and central bank liquidity.
Crypto Insolvencies
- Crypto firms like Voyager, Celsius, and BlockFi mimicked banks.
- They borrowed short and lent long, failing due to bank runs and duration mismatches.
Banking and Venture
- Most banks lend against real assets with cash flow like real estate or auto loans.
- Silicon Valley Bank (SVB) differed by focusing on venture debt and VC credit facilities.