How the Fall of Swiss Pride For 166 Years Affects Crypto Assets

  • Banking mishaps like SVB and Credit Suisse are causing panic among investors.
  • Meanwhile, Bitcoin and Ethereum reach highs of this year.

“Credit Suisse is no more,” reports Bloomberg on Twitter, explaining the downfall of the bank that faced decades of scandals, legal issues, and management upheavals.

“Credit Suisse stock has tumbled more than 95% from its pre-financial crisis peak,” tweets Bloomberg page quoting that the firm was valued at a mere 7.4 billion Swiss francs ($8 billion) at the close on Friday.

Credit Suisse Group AG was a global investment bank and financial services firm founded and based in Switzerland, becoming an emblem of Swiss pride for 166 years. However, recently the bank suffered a revolving door of senior management which came with leadership changes that put pressure on performance.

The risky business of the bank began with “the burning bed” incident of 1990. According to the report, “Then CEO of Credit Suisse Rainer Gut influenced the bank’s US partner, First Boston, for a modest capital injection to backstop bad loans.” Subsequently, Boston had yielded the lucrative debt markets of the 1980s and loaned billions to fund buyout transactions. However,  the industry imploded, which left the bank in ruins.

Afterward, the successor, Lukas Muehlemann, bought Winterthur Insurance in 1997, then acquired Donaldson, Lufkin & Jenrette in 2000. “This turned out to be an expensive misstep,” comments Bloomberg. Later, in January 2019, a feud between the CEO Tidjane Thiam and Iqbal Khan “became a lurid corporate scandal,” reports Bloomberg, which shattered the Swiss bank’s reputation.

The bank, infamous for its discretion and broadcasting a culture where personal vanities outweighed ethical and legal boundaries, was under investigation in the wake of the Thiam-Khan episode. The banking regulator uncovered five additional cases of surveillance from 2016-2019.

Later in 2021, the bank suffered a $5.5 billion loss when its biggest client Bill Hwang’s hedge fund Archegos Capital Management imploded. Finally, the new leadership duo of Chairman Axel Lehmann and CEO Ulrich Koerner had pitched a return to Credit Suisse’s Swiss roots as the best way forward but could not deliver in time.

Although fractional reserve banking systems such as SVB and Credit Suisse are facing a crisis, it is giving a boost to crypto prices. According to Coinmarketcap, Bitcoin is seen at a nine-month high at present, as panicking investors are moving towards “safe havens” like cryptocurrencies.

Bitcoin has reached its highest jump this year at $28,474, a 26% jump since last week, showing a growth of 35% in just ten days. Furthermore, Ethereum, the second-biggest cryptocurrency, is seen to have a seven-month high of $1,846.50.

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