Effect of Bitcoin on Bank Deposits and the Economy

[ulhaq]

Say cryptocurrencies take off and people hold more of their savings in crypto instead of bank deposits. Currently everyone's savings is in bank accounts which is being lent out to businesses and hence stimulating the economy. What is going to happen if bank deposits drastically decrease?

On the one hand, maybe it will not have much effect on the economy because since lending will become tighter, businesses will need to justify the loans more (vs. if there is easy access to money) and will create stronger proposals. On the other hand, could it have a detrimental effect on the economy?

[paul00]

I don’t think the emergence of bitcoin would have a great impact on the economy since bitcoin and banks are different entities which targets different market as well. Maybe deposits would somehow be lessen due to investment in bitcoin but I think banks would still prevail on the depository agents that people have

[louie69]

I don’t think the emergence of bitcoin would have a great impact on the economy since bitcoin and banks are different entities which targets different market as well. Maybe deposits would somehow be lessen due to investment in bitcoin but I think banks would still prevail on the depository agents that people have

I think Bitcoin is redefining the centralized banking scheme by leveraging the power of blockchain thus slightly affecting  conventional bank deposits where it will be minimize.  As for the economy, It may have an impact especially for the unemployment rate in a certain country wherein the unemployed may have the chance to earn and profit through involvement of bitcoin. Also, Bitcoin may still affect the economy even if it does not turn to be a currency that many people utilize and empathize.

[ulhaq]

You guys are missing the point. Let's say hypothetically, in the future, tens or hundreds of millions of people withdraw their bank deposits and use it to purchase bitcoin, because they believe it to be safer/less prone to inflation. Yes, those dollars that are exchanged for bitcoin are going to go to to other people, but the VALUE of all that money will be less because of the USD/BTC exchange rate. So bank checking/savings deposits are reduced by billions of dollars. What effect is that going to have on the economy?

[CinemaAI]

You guys are missing the point. Let's say hypothetically, in the future, tens or hundreds of millions of people withdraw their bank deposits and use it to purchase bitcoin, because they believe it to be safer/less prone to inflation. Yes, those dollars that are exchanged for bitcoin are going to go to to other people, but the VALUE of all that money will be less because of the USD/BTC exchange rate. So bank checking/savings deposits are reduced by billions of dollars. What effect is that going to have on the economy?

It's a good question. Let's say a substantial portion of the value of dollars flows into cryptos. The theoretical impact on dollars will be a substantial depletion of remaining value, or inflation. Major inflation would result in central bank tightening to reduce liquidity and put downward pressure on the rate of inflation... see 1980s and Paul Volcker (Fed chair at the time).

BUT, since inflation in this case is not being caused by an overactive economy, the result would then be stagflation... the worst of both worlds. High inflation and low growth. Not pretty.

[ItsEzMkay]

In theory yeah it would effect how the economy functions but I don't think it will cause the economy to struggle. How much money in the world do you think can actually flow into bitcoin? I would imagine that maybe 25% flows into cryptos and bitcoin total and even then that is absolutely massive. Therefore I think the effect on economy will be minimal

[Gracechen17]

Say cryptocurrencies take off and people hold more of their savings in crypto instead of bank deposits. Currently everyone's savings is in bank accounts which is being lent out to businesses and hence stimulating the economy. What is going to happen if bank deposits drastically decrease?

On the one hand, maybe it will not have much effect on the economy because since lending will become tighter, businesses will need to justify the loans more (vs. if there is easy access to money) and will create stronger proposals. On the other hand, could it have a detrimental effect on the economy?

First, i believe bitcoin users or crypto users are helping increase bank deposits. Crypto users will not entrust their big money in banks for fear of being questioned. If they have millions in hand i doubt they will put it in banks or banks will freeze their accounts and investigate the source of the said money and charge tax on it. I know some friends do not put their money in banks. In economy, i dont think it helps much but to some jobless individuals maybe.

[phreakk]

Say cryptocurrencies take off and people hold more of their savings in crypto instead of bank deposits. Currently everyone's savings is in bank accounts which is being lent out to businesses and hence stimulating the economy. What is going to happen if bank deposits drastically decrease?

On the one hand, maybe it will not have much effect on the economy because since lending will become tighter, businesses will need to justify the loans more (vs. if there is easy access to money) and will create stronger proposals. On the other hand, could it have a detrimental effect on the economy?

Bitcoin won't mess with the banks. Bitcoin is a big bubble & definitely not worth its current value.

Cryptocurrencies in general, however, definitely do have the potential to beat banks. I know a lot of people who are looking for places to put their money and gain a little interest, other than banks. Why? Even the best banks offer only about 0.1% interest, whilst the inflation is far higher than that. Cryptocurrencies stop that inflation and allow us to stop losing money from saving.

Another great feature of Cryptocurrencies is the fact that they are, or will be, ways to transact very quickly, without too high costs and anonymously. All 3 things beat banks, as Banks often:
-Charge fees
-Sometimes take days to transact
-Continuously watch where your money is coming from & going to

Bitcoin, however? Bitcoin is a failure. It was a test and a nice first version of a revolutionary technology, but it's not more than that. It won't have any significant effect on the Economy other than some losing a lot of money and some gaining a lot.

Bitcoin is nothing more than a simple redistribution of wealth.

[MarkoViewly]

Just talked to a banker today on a similar topic. My questions were is our government looking to do something about Bitcoin being accepted or making it legal? Are earnings from Bitcoin legal to declare and share with the internal revenue service? Did someone actually filled any kind of form about revenue from any sort of crypto around? Please take note that I live in a country that is still pretty much functioning with 90s technology so all of this is big news to most of the people around. His answers were the following, our government is actually giving zero fucks for the time being about any sort of digital payments (we were promised to be listed on PayPal in 2012, 2018 - still nowhere near that). Talking with the IRS about this sort of earnings will usually depend from their current mood. They might tell you that you are OK with receiving funds from abroad or they might tell you you must pay 10% personal income tax on those or simply reply that it is illegal to "convert" any sorts of digital assets into money. People that earn online mostly use prepaid cards to avoid taxes or any sort of trouble that can surface in this hellhole. He was not much into it, but said that every sort of income from a bank that is abroad is welcomed in our country and can only do good to our economy. We'll probably see what happens in ~5 years from now when the world adopts crypto and we are one of the few countries to still work with fiat.

[jimbo2000]

Say cryptocurrencies take off and people hold more of their savings in crypto instead of bank deposits. Currently everyone's savings is in bank accounts which is being lent out to businesses and hence stimulating the economy. What is going to happen if bank deposits drastically decrease?

On the one hand, maybe it will not have much effect on the economy because since lending will become tighter, businesses will need to justify the loans more (vs. if there is easy access to money) and will create stronger proposals. On the other hand, could it have a detrimental effect on the economy?

Logically bank deposits can increase if you assume bitcoin investments and savings are substitutes. I think that the relationship isn't nearly as strong as you feel. Mostly people invest a much smaller amount than they save. But less deposits in turn could lead to banks needing to put up interest rates to encourage saving.

[Hydrogen]

Say cryptocurrencies take off and people hold more of their savings in crypto instead of bank deposits. Currently everyone's savings is in bank accounts which is being lent out to businesses and hence stimulating the economy. What is going to happen if bank deposits drastically decrease?

On the one hand, maybe it will not have much effect on the economy because since lending will become tighter, businesses will need to justify the loans more (vs. if there is easy access to money) and will create stronger proposals. On the other hand, could it have a detrimental effect on the economy?

....

This looks like a discussion on whether banks or crypto are better at stimulating economies, empowering small businesses and creating jobs.

These days, I think credit cards actually provide more stimulus than bank loans. Crypto has historically been weak in terms of the loan industry. Collateral based loans have been difficult to come by in crypto and verification or other methods of enforcing loan repayment have never worked well.

On the intangible side are the numerous small businesses and industries which have popped up as a result of crypto's introduction. The benefits provided by crypto liquidity providing electronic merchant transactions to those living in poverty who could not afford the minimum balance of a bank account. There are a large number of intangible benefits provided by crypto which could easily overshadow any proposed benefits provided by banks or credit card companies.

In terms of real world application, I would say that bitcoin and crypto have done more to empower venezuelans than banks have. If that precedent holds true to the rest of the world, then bitcoin and crypto definitely create more jobs, provide more economic stimulus and benefit to people of the world than banks or private sector industry.

[syaripudin]

now crypto is a form of investment that has a high asset value so this is of course not impossible if many people will switch from doing bank deposit activities to make an investment on crypto and of course this will have an impact on economy. I think this will push the bank system that will adopt blockhaind technology to re-attract customers to deposit at the bank. and I think in the days to come there will be a lot of banks that follow the blockhaind system.

[CHENIEN]

The effect of bitcoin into banks deposits is growing up, many people earn from bitcoin are keeping their money to the banks, and the economy also developed and improved because of the total income of people who access bitcoin, eventhough the income from bitcoin are not directly collected a tax but still the bitcoin can contribute to economic development because the money from bitcoin will used to transact some businesses in public or in governments businesses.

[PEG-TOKEN]

If this were the case and more savings went into the crypto system then more people may choose to invest in start up's.
This in turn would change the way companies are created and could help provide new flourishing sectors.

[jseverson]

At the current state of things, it could certainly stifle the economy and eventually lead to stagnation. I believe the economy and banks will adapt to that situation though. Exchanges act kind of as banks, in a sense that they keep people's coins, so it's not too much of a stretch for them to also try lending. Banks could diversify and also act as exchanges. I honestly don't know though, I feel that I'm too short-sighted lol.

What may be more concerning is the fact that Bitcoin is deflationary, and we see the effect that it has on people; everyone HODLing instead of spending.

[zhekinsp]

Say cryptocurrencies take off and people hold more of their savings in crypto instead of bank deposits. Currently everyone's savings is in bank accounts which is being lent out to businesses and hence stimulating the economy. What is going to happen if bank deposits drastically decrease?

On the one hand, maybe it will not have much effect on the economy because since lending will become tighter, businesses will need to justify the loans more (vs. if there is easy access to money) and will create stronger proposals. On the other hand, could it have a detrimental effect on the economy?

The deposits in banks maybe lesser due to more investors are coming to crypto market everyday.But still people don't have good trust on bitcoin or other crtptos so it doesn't affect on big scale for now.But in future the crypto currency investments leads to shut down of many banks due to insufficient deposits or investments on fiat.So banks are trying to create their own cryptos for securing their future.

[sorin90]

I think the cryptocurrecy has a negative effect on the banks but this might turn out to be a good thing for people, because the banks will need to make new, more afordable packages for its clients to keep them. The cryptos are like a new big and powerful bank.

[ajmapalo22]

I don't think bitcoin decreases bank deposits and instead increases bank's clients as well as deposits because like me every bitcoin I earn from signature campaign and trading was converted into fiat then I transfer to my bank account because I'm afraid the value will go down and for the economy I think bitcoin has help the economy to grow by helping people to earn and become financially stable.

[el kaka22]

If this were the case and more savings went into the crypto system then more people may choose to invest in start up's.
This in turn would change the way companies are created and could help provide new flourishing sectors.

Yes, this can surely happen. Even now, in my region students across the globe come here for educating themselves and to acquire university degree. Then they try some kind of startup and settle up their life there with good profits out of that startup. People's usually look at a chance to start a new startup as a investment and to start learning good profits out of it. Also many new flourishing sectors can come out to help the nation to be rich enough.

[aoihs00]

Say cryptocurrencies take off and people hold more of their savings in crypto instead of bank deposits. Currently everyone's savings is in bank accounts which is being lent out to businesses and hence stimulating the economy. What is going to happen if bank deposits drastically decrease?

On the one hand, maybe it will not have much effect on the economy because since lending will become tighter, businesses will need to justify the loans more (vs. if there is easy access to money) and will create stronger proposals. On the other hand, could it have a detrimental effect on the economy?

I think if the level of banks go down or as per your saying if people do not put any money into bank then obviously this will effect the economy in negative way. This is the reason government and financial institutions  hate the black money thing where most of the economic strength goes down due to hidden money. This puts pressure on the central bank to print more fiat which demonetises the fiat value and thus leads to financial crisis.  I think similar effect will happen if people start putting everything into crypto. This will lead crypto to catch up new market but I’m sure before that could happen government will ban such deposits outside the bank if they are being done over the limits.