Bank Crisis likened to 1929 Stock Crash – Musk

Tesla CEO Elon Musk took to Twitter to compare the ongoing banking crisis in the United States to the 1929 stock market crash that triggered the Great Depression. Musk’s tweet was a response to comments made by Cathie Wood, CEO of ARK Invest, who criticised regulators for ignoring traditional banking systems while concentrating on the decentralised financial sector. According to Wood, Bitcoin, Ethereum, and other crypto networks have remained unaffected by the crisis while the traditional centralised counterparts have suffered.

Wood criticised regulators for focusing on the wrong targets and noted that the traditional banking system is experiencing a crisis characterised by asset and liability duration mismatches, with short rates surging 19-fold in under a year. Deposits in the banking system have also fallen year-on-year for the first time since the 1920s. Instead of concentrating on decentralised platforms that have no central points of failure, Wood believes that regulators should focus on the centralised and opaque points of failure in traditional banking systems.

Musk concurred with Wood’s analysis, stating that the current banking crisis has many similarities to the 1929 stock market crash. Ahead of the Great Depression, public utility holding companies were accused of unscrupulous actions, which led Congress to pass federal regulations aimed at stabilising the markets. However, the Fed ignored the situation and did nothing to prevent the wave of bank failures.

This time around, regulators are making efforts to curb the situation, with the Fed, Treasury Department, and FDIC rolling out plans to protect depositors. Nonetheless, the situation’s resolution remains unclear, and investors remain optimistic about the future of their assets.