I really find it fascinating how can one bear more trust in this made up virtual cash than into a well established insured banking system.
Funny thing is, you are only considering banks in Europe/US. Not all banks around the world are the same. I have had money stolen from me in banks multiple times. Not though fees or interest, but literally stolen by the people working at banks. This has also happened to many people I know by employees using various methods.
There are stories in the news quite often of people at the highest level in banks stealing money. Fortunately they usually get executed, but I am sure there are many more that are not caught.
I have no doubt that for many of the banks, if they collapsed, I would receive no money back. I am, luckily, in a position where I can have bank accounts in different countries and so keep any major funds in a place with better regulatory protections. Not everyone can.
Crypto is a global currency. Most people are thinking about it with a very local mindset.
[Edit] There is also the matter of cross border transfers. If I want to send money overseas, I can send it to a family member, if I register their documentation and I can send it to my own account overseas (at considerable expense). If I were a local, however, It would be impossible to send money out. Hell, even incoming transfers to my accounts from inside the country are not allowed unless I provide proof of where the funds are from and tax receipts. I've actually had my salary payments held by the bank for weeks, because the amount included a bonus that was not part of my regular salary. I cannot even go to the bank with cash and deposit it, unless I provide documentation with rubber stamps.
Countries like India and China are likely even worse than this! Even in Korea, it is difficult to send money out, hence all the news regarding government regulation. If you look at the countries where crypto usage is booming, they are usually the countries with shitty banking and lots of restrictions. Asia, Russia and Eastern Europe.
The US and Europe are pretty good. To combat money laundering, you have government agencies that investigate things whilst keeping the banking regulations open. Other countries go the opposite way and have very stringent banking regulations, but no agencies. This doesn't stop the real criminals and just makes it a pain in the ass for everyone else.
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Crypto is not safe at all. When the stock market took a dive over the last week, that money didn't go to crypto. I'm not entirely sure where it went, actually. Bonds, maybe?
I think that the money goes elsewhere long before the crash. It's the people who sell in the weeks leading up to the crash that make the real money. Some will hold the fiat for a while, waiting for the dip to buy back, others might put it into foreign currencies, whilst some will invest in more international stocks and bonds. Anything with a high liquidity that will allow them to buy back into their next potential investment. Funny thing is, people often talk about money being wiped off of stock markets, like it has disappeared. It's not, it just left the market into something else well before the crash. As an example, with the housing crash, all that money went to developers and agents months/years before it all collapsed. You have 1 side taking money out, whilst others keep pumping money in. When the balance is tipped to too far to those taking it out, that's when it crashes. Leading up to the crypto crash, I sold a few of my coins to recoup my investment. That money that was 'wiped off' the crypto markets, went to the people that sold leading up to the highs. People will keep buying crypto as they believe it is an emerging market and as it gets more exposure, more people will buy into it as there is a lot of room for expansion. The one certainty in both stocks and cryptos is that it will crash and it will peak. There will be bubbles and collapses. What really makes crypto different, is that it is such a small market, in comparison to traditional investments, that all of this is exaggerated both in terms of time and % change. 'If' the crypto market grows, it will experience slower and less pronounced swings, like the stock market. It is already showing signs of this. I remember back in 2008-2009 when the price of BTC went from $25 to $2 pretty much overnight. That was a 12.5x change. The last rise from $1000 to $20 000, took much much longer and it's been similar for some of the alts like ETH.
The whole system is closer to gambling than anything. Not just the crypto markets, but stocks as well. People don't usually buy stocks because they believe in a company, they buy them because they think the stock will rise. Historically/on average, if you do try to buy into companies that you believe in, you'll do worse than the index. There aren't many fund managers that do better than the index, and those that do are generally just lucky. It doesn't matter to them anyway, as they get their % cut regardless. If you ever buy into stocks using a mutual fund or agent of any kind, the first question you ask is how their portfolio has performed in comparison to the index (after their fees). Only a small percentage of these will ever do better.
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