Since November 2021 till date, the crypto assets have witnessed a drastic decline in their price value. During this period, major cryptocurrencies, such as Bitcoin, Ether, etc., have seen their prices fall from an all-time high of about 50%.
For instance, the price value of Bitcoin (BTC) rose to about $68,000 in November 2021. The same token dropped to about $20,000 in October 2022. Due to this prolonged period of fall in crypto asset prices, investors are losing interest and pulling out their funds from the crypto market.
Interestingly, these investors are plowing (back) their investments into traditional banks. These massive deposits in traditional currencies have led to about 30% of traditional banks' revenues.
The report shows that traditional banks witnessed prolonged periods of stagnant investment volumes during the crypto market boom. Instead of investors making deposits, they were withdrawing and pulling their funds into the crypto market.
Financial institutions such as Deutsche Bank, UBS Group AG, and JP Morgan are some major banks that have declared a spike in their revenues. For instance, JP Morgan said it recorded a 15% increase in its fixed-income markets in the second quarter of 2022.
Similarly, the Union Bank of Switzerland (UBS bank) revealed that foreign exchange contributed massively to its revenue spike. The bank's revenue increased by 19%. For a bank like Deutsche Bank, the 32% spike in revenue in the second quarter of 2022 is the highest recorded in a decade.
Many industry players and analysts opine that the massive migration of investors from digital assets to traditional currencies is due to the higher range of interest rates and bond yield elements that will likely accompany higher currency volatility.
Aside from the current bear phase of the cryptocurrency ecosystem, the prevailing economic conditions and inflation leaves investors in a dilemma. Seeing the dollar stand out as a key hedge in the market while other global currencies get affected also contributed to the massive investment in traditional institutions.
The bull phase of the cryptocurrency market before November 2021 signaled the most profitable period for investors. Albeit, traditional institutions did not have it rosy; it was a period of low investment and patronage.
The Central Banks of these countries responded with various plans and policies. Some of these policies led to a fall in the price value of crypto tokens. Since investors are out to make a good return on investment, they pull out their funds and return to traditional financial institutions.
For instance, the Union Bank of Switzerland attributed foreign exchange as its main revenue driver. Analysis shows that crypto transactions and exchanges across borders substituted foreign exchange during the crypto market boom, and the result of the bear market is the increase in foreign exchange.
While traditional institutions are having a fruitful period, the crypto market is struggling to regain its lost glory.