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Banks, crypto and real estate heading for a crash: economic collapse is approaching

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Banks, crypto and real estate heading for a crash: economic collapse is approaching

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Other than 1929, are we faced with a new economic collapse? Banks, crypto and real estate heading for the crash

Affaritaliani.it offers this title: Sensational: Europe wants to “cancel” Italian banks. The alarm. After reading the article I wanted to pull out of the drawer some research developed some time ago and from what emerged it did not generate an edifying picture. Why? Recent events in the cryptocurrencieswith bankruptcies and embezzlements (read FTX, BlockFi, Luna, etc.), the various insolvencies and bankruptcies in the American, Chinese and European markets and the strong crisis of real estate funds (read Evergrande, Signa Holding, Country Garden etc.), as well as the scarcity of financing for families and companies by banks, some of which have also suddenly suffered significant bankruptcies and/or insolvencies (read Silicon Valley Bank, Signature Bank and the most famous Credit Suisse, to name a few) here is what, in my opinion, these three subjects are encountering: the cryptocurrenciesil real estate market not banks in the economic-financial market.

CRYPTOCURRENCIES

The market of cryptocurrencies is represented, there are currently more than 1,500 cryptocurrencies in circulation for an amount estimated at 1.38 trillion dollars (1,380,000,000,000), a considerable sum which is represented by both “clean” investors and “delinquent” investors. Cryptocurrencies have gained considerable popularity in recent years, but significant risks have also emerged from this growth. Let’s look at some of the reasons why a financial crash could occur in the cryptocurrency market:

Extreme volatility: Cryptocurrencies are notoriously volatile. Their prices can fluctuate wildly in a short time. This volatility can lead to significant losses for investors.

Uncertain regulation: Many governments are still trying to figure out how to regulate cryptocurrencies. Regulatory uncertainty can create turbulence in markets and affect investor confidence.

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Speculation and FOMO (Fear of missing out): Many investors enter the cryptocurrency market out of fear of missing out on the opportunity for quick profits. This speculative behavior can inflate prices and create bubbles that then burst.

Immature technology: Despite progress, the technology behind cryptocurrencies is still developing. Vulnerabilities, bugs and cyber attacks can undermine trust in the system, despite many platforms using blockchain.

The consequences for markets and savers

If a financial crash were to occur in the cryptocurrency market, the consequences could be very serious:

Impact on financial markets: A cryptocurrency crash could have ripple effects across global financial markets. Investors may sell other assets to cover losses, causing prices to fall overall.

Losses for investors: Those holding cryptocurrencies would suffer significant losses. Many savers have invested considerable sums in these digital currencies and a crash could erode their savings.

Systemic risk: If the cryptocurrency market suddenly collapses, it could have a systemic impact, i.e.: the collapse of an entire financial system or market. Financial institutions involved in cryptocurrencies could be at risk.

Compromised trust: A crash could undermine investor confidence in the cryptocurrency sector and discourage new participants. This could slow the adoption and development of cryptocurrencies.

In conclusion, while cryptocurrencies offer earning opportunities, it is important to recognize the associated risks. Investors should do thorough research, diversify their portfolio and carefully consider the implications of a financial crash. Ever heard of the tulip bubble?

REAL ESTATE FUNDS

Real estate funds have been under observation for some time, their capitalization is quantified at 4.35 trillion (4,350,000,000,000) dollars, for the reasons you find in this list:

High interest rates: Rising interest rates are making real estate investments less attractive. Furthermore, higher financing costs lead to a reduction in demand for real estate.

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Vacant commercial properties: The pandemic has hit the commercial real estate industry hard. Many offices, shops and hotels remained empty, causing a decrease in real estate investors’ incomes.

The consequences would be these:

Losses for investors: A crash in real estate funds could lead to losses for investors. Those who have invested in commercial real estate may see a decrease in returns.

Impact on the economy: The real estate sector is closely linked to the economy. A collapse could have negative effects on employment and investor confidence.

BANKS

Central banks are focused on high interest to bring inflation below the 2% dogma so let’s see what the consequences are:

Financing costs: when the central bank decide to increase interest rates, it becomes more expensive for banking intermediaries to finance themselves. As a result, banks can increase the rates on loans and mortgages they offer to customers.

Extra profits: High interest rates ensure attractive profits for banks. Banking intermediaries get a interest mark-up, or a difference between active interest (those collected from loans and mortgages) and passive interest (those paid to savers who deposit sums). With high interest rates on loans and mortgages, banks’ interest mark-ups have increased by almost 20 percentage points compared to two years ago.

Credit crunch: the tightening of interest rates has caused a decrease in requests for first home mortgages. Such high financing costs could lead to an increase in default by families and businesses that have signed financing and loan contracts.

These reasons have led central banks to ask the credit institutions, which are under their supervision, to strengthen the capital, so that they increase their reserves, to make up for the considerable financing provided and in view of a possible uncollectability of the loans. Question: Does this cause any side effects? In conclusion, the cryptocurrency market, the real estate market and above all the banking market are subject to a risk that must be taken seriously. Are we in the presence of a new 1929 in a more sophisticated and modern way?

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Unlike that period, which instantly became dark, today we are able, if we want, to read the numbers and realize which sectors we need to intervene on. One last thing, could $5.73 trillion at risk cause a domino effect and if so of what proportion? To complete the picture, the bailout of the banks, AIG etc. it entailed an outlay of more than a trillion dollars and with damage to the world economies that has not yet been fully quantified and is currently not remedied.

To all this we must add the various patchy conflicts that every day find new life in throwing the economy and finance into turmoil. At this point I would say that Europe and other nations, rather than working on the banking risk, would do better to deal with what and how many are the probabilities of this happening, perhaps with the help of Artificial Intelligence, above all to find one or more ways in order to make up for such an eventuality, given that we all know how fragile and vulnerable our globalized economic-financial world is.

In the near future will we be able to face a crash of global and epochal dimensions? The black swan? The black Swan? I have never been pessimistic, but it worries me to see that those in charge are waiting for things to happen, since savers always pay, or perhaps not only in this case?

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