Be your own bank!

With crypto, you can be your own bank.

One of the main advantages of owning crypto is that there is no counterparty risk, unlike traditional money, where you are at the mercy of a bank. Technically, you are lending your money to a bank. A bank makes a promise to you that when you need the money you can use it.

You run the risk that the bank will fail or be unable to meet its obligations. This is because banks actually lend and invest customers' money to make a profit. If something goes wrong with these investments, customers' money could be at risk. There can also be fraud by the bank for its own gain, of which many examples can be found.

This is different with crypto, where you have the option of storing your crypto securely in your own wallet, giving you control over your money and eliminating counterparty risk.

Of course, it is still possible to deposit your crypto with a third party, such as Knaken, but the important difference is that you have the choice to keep large amounts of digital money under your own control. This gives you more control and you cannot lose your money due to the failure of a third party. So, in effect, you can become your own bank.

Trust U.S. Verify

Most banks have around 10% of all deposit balances readily available for withdrawals. So a bank is built on trust. For more than 5% withdrawals within 1 day, a bank immediately falls over.

In traditional banks, all transactions, loans and investments are kept in internal databases accessible only to the bank. This means that, as a customer, you have to trust the bank that everything is kept honestly and that no mistakes are made. Also, a bank can use your money as collateral and make profits with it that you yourself as a customer are unaware of.

With crypto, you have the ability to verify for yourself what happens to your money, as all transactions are public and can be tracked on the blockchain. This reduces the risk of errors and fraud.

With DeFi, you also have the ability to lend, invest or strike your crypto yourself and earn interest. The big difference is that now there is no third party (which you therefore have to trust) involved in doing this for you. Everything is completely transparent and verifiable.

How robust are the banks really anymore?

In recent years, Central Banks (the Fed and ECB) have kept interest rates very low, sometimes even setting them below 0%. This has led to high inflation. In response, Central Banks quickly raised policy rates. However, this has led to problems for banks that bought long-term products, such as bonds, at low interest rates. These products have now rapidly lost their value due to Central Banks' policies.

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If people then also lose confidence in the bank, a bank run could occur. This means people want to withdraw their money from the bank en masse. This is actually immediately fatal for a bank, as they only have a small percentage (10%) of deposits readily available for withdrawals. Consequently, this is exactly what happened recently at Credit Suisse, First Republic bank and Silicon Valley bank.

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