Thread by @chains_lab

What's happening to Credit Suisse and it’s impact on Crypto, An ELI5 Thread.

#CreditSuisse is one of the 9 global "Bulge Bracket" banks, the 9 largest multi-national banks in the world.
And it is at a 'Critical Moment' now, says the CEO.
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Credit Suisse is considered to be a global systemically important bank, meaning that in the case of their failure, there will be a financial crisis on a global scale.
They are referred to as "too big to fail", like the #LehmanBrothers. Now their situation reminds us of 2008.
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Talking history, Credit Suisse was founded in 1856 to fund the development of Switzerland's rail system. In the 1900s, it began shifting to retail banking. It is known for strict bank–client confidentiality and banking secrecy.
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In the 2008 financial crisis, it was one of the least affected banks. According to The Wall Street Journal, "Credit Suisse survived the credit crisis better than many competitors."
But afterward it began shrinking its investment business, executing layoffs and cutting costs
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According to their Annual Report of 2021, Credit Suisse had assets under management (AuM) of over CHF 1.6 trillion, a revenue of CHF 22.7 Billion, and a Net income of -1.7 billion CHF.
Today, $CS stock price is setting a new ATL of $3.92, down more than 70% since Feb, 2022.
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Yet, the Credit Suisse CEO said on Sept 30, 2022: "I trust that you are not confusing our day-to-day stock price performance with the strong capital base and liquidity position of the bank."
Is this true, is Credit Suisse really healthy?
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October 1st, 2022, a rumor started to spread over Twitter, that Credit Suisse is insolvent, as they are overleveraged. Their credit default swaps (CDS) spreads are rising to a CRITICAL level, reflecting the expectation of the market that they gonna default on their debt.
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Credit Suisse’s 5Y CDS are going absolutely vertical and are now approaching the highs of the global financial crisis of 2008. Higher CDS = Stronger market-wide belief that is insolvent and going to fail.
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But, the Credit Suisse & Deutsche Bank CDS explosion to a level above 2008 doesn’t mean they’re going bankrupt. It means they will going to bankrupt IF central banks continue to be hawkish. So the FED/ECB have the choice, pivot or destroy global systemically banks.
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If a massive deleveraging event happens, a domino effect will occur due to the pressure of mass panic selling. Even worse, this economic crisis will spread from one market/region to another, known as Contagion.
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This could send the world into a deep recession and Liquidity is quickly becoming a major concern.
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https://twitter.com/MacleodFinance/status/1576491265218134016?s=20&t=qj8KrXt3q1EhWyj4ZETuKA

Despite the “healthy” statement by their CEO, their shares well reflect this matter, down 95% from the ATH.
And the market always right, there must be something wrong with Credit Suisse. Otherwise, insiders, investors, retailers will jump on the boat immediately.
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This is like the #Celcius and #3AC Tradfisituation, but on a much much larger scale. Despite their wealth management platforms still doing well, their investment department is a disaster, according to various insiders. Their shares reflect this matter, down 95% from the ATH.
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At this point, a bank run is likely to happen with Credit Suisse, and trigger a domino reaction with other big European banks, such as Deutsch Bank, as they all having exposure with each other.
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#2008flashback. So if this event is gonna occur (hope that it doesn’t), what will come for the Cryptocurrency market and Bitcoin overall? Chainslab had studied and put down some likely scenarios in case this happened.

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First: FED Pivot
The dollar’s parabolic move has been devastating to the rest of the world and should come back to bite US competitiveness, jobs, and economic activity, forcing the FED to pivot.
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The pressure of interest rates and the USD increased sharply, the devaluation of other major currencies led to many banks and credit systems around the world, especially in Europe, on the verge of bankruptcy and showed its weaknesses. and not healthy in the capital.
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If the Fed is more dovish in the next interest rate adjustments, the risks of financial collapse will be reduced, however, the trade-off will be the specter of inflation continuing to fly high. How might inflation affect Bitcoin?
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It can be said that Bitcoin is gradually becoming the new haven asset, with many similarities with Gold in terms of scarcity, but superior in mobile liquidity
Though many people are comparing Bitcoin to the stockmarket as the crypto market has been affected by the news lately
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Practically speaking, all markets have cycles and Bitcoin is in a bear now. If the Fed cools down on hiking interest rates, Bitcoin can grow strongly, possibly leaving the altcoins alone to rally, affirmation of the King.
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Second scenario: FED remains hawkish

A crisis may occur if the Fed continues to aggressively raise the interest rate, pushing the financial capacity of institutions to the limit until they "break things". The #FOMC notes showed that the Fed would remain hawkish for the rest of 2022 until the pain is unbearable.
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Continue hiking rates until something breaks -> bank run dominoes, pension funds deficit, illiquid investment markets, sell off assets, currency crisis…
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So where will the liquidity go?
It must be safe haven assets with characteristics of liquidity, functionality, limited supply, certainty of demand and permanence such as gold, GovBonds, etc…
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The two designated as systemically important financial institutions (SIFI) “too big too fail” - Credit Suisse #CS and Deutsche Bank #DB is forecast to be on the verge of collapse. Remind you of the times when they labeled Lehman Brothers as “TBTF”.
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EUR, GBP and other currencies depreciation has created a new transition for investors to convert into BTC instead of just gold. 0% trading fees on BTC on some big CEXs will attract a fresh influx of liquidity
Will it answer the view "BTC=Digital Gold". A new safe haven asset?
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Why BTC?
#Bitcoin is a convenient stored asset that only needs a phone or USB wallet with the feature of fast liquidity anytime, anywhere, not controlled by any authority. In the worst case, even the bank won’t allow your own withdrawals, but not with crypto.
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Third scenario: Bail out
Though there is a good chance that the Central banks will go all out to save. If the EU central banks decide to bailout, more inflation coming, huge burden must be placed on their people.
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The liquidity to bailout has to come from somewhere, either keep the money printer on (QE) and go against the Fed's hawkish policy. No one really knows when the system will start collapsing. But when it does, it will be extremely brutal. It's a ticking time bomb.
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Liquidity can come from the state budget, or foreign debt to save these “TBTF”. It will cause hyperinflation, threatening to spread into a global crisis. Banks have exposure to each other. If one crashes -> the domino collapses. If one is saved -> so is the others.
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However, bailouts do not solve the biggest problem in Western's financial system: Trust. Continuing to ask for a second bailout in the last 15 years, people's confidence is also gradually waning because they won't know where to put their money, or who will pay their pensions.
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Some selections for them by now: Gold with its rich history as a safe haven asset? Bitcoin as a new “digital gold” yet volatility? Some DeFi lending protocols that offer yields while lending? Or American Dollar, a peaking currency?
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From Chainslab's perspective, the second and third one are most likely to occur simultaneously. In summary, the FED will keep its hawkish policy, and it is highly likely that EU Central banks will bailout these “TBTF” Banks.
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Ultimately, whatever the impact on financial markets, we remain bullish on #Bitcoin in 2023. The beginning of the bull cycle will come soon, and this time it will be a sight to behold.
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