Wharton Professor Expects Bitcoin to Fall When People Feel Safe in the Banks Again
A finance professor emeritus at the Wharton School of the University of Pennsylvania, Jeremy Siegel, expects the price of bitcoin to fall when people feel they are “safe in the banks again.” Following the collapse of several major banks, he noted that “Bitcoin is enjoying its biggest rally in a long time.”
Professor Siegel Wants Government to Temporarily Insure ‘All Deposits Everywhere’
In his weekly commentary published by New York-based asset manager Wisdomtree on Monday, Professor Jeremy Siegel shared his views on the U.S. economy, bank failures, and bitcoin’s price outlook. Siegel is a professor emeritus of finance at the Wharton School of the University of Pennsylvania who currently serves as a senior investment strategy advisor to Wisdomtree.
Following the collapse of several major banks, including Silicon Valley Bank and Signature Bank, many people have urged the government to guarantee all deposits temporarily to restore confidence in the banking system and avoid runs on smaller banks. Professor Siegel stressed:
I reiterate we need to have temporary insurance of all deposits everywhere until we can reform the entire deposit system.
“All payroll accounts need to have full insurance. We need protection from fraudulent loans that create deposits, but in general, we need much higher deposit protection, so these bank runs do not occur,” he continued.
However, U.S. Treasury Secretary Janet Yellen said last week that the federal government is not considering guaranteeing all deposits but could do so if needed to prevent contagion.
“The recent turmoil in markets also makes me more optimistic on the outlook for 2024,” Professor Siegel continued. “If this banking accident occurred later, we would have much higher rates. So, a natural downshift in how tight policy will become from this is one of [the] silver linings from this current banking crisis.” The professor added:
I want the Fed to get back to growing the money supply at a 5% level that is consistent with 2% inflation and 2-3% real growth in the economy. When you have the money supply shrinking over the last 12 months as we do now, that is a problem for liquidity.
Professor Siegel’s Bitcoin Outlook
Professor Siegel also commented on the performance of bitcoin following the failures of several major banks. “Bitcoin is enjoying its biggest rally in a long time,” he wrote, noting that the cryptocurrency “was launched with a mantra that the banking system was terrible, and the economy needed an alternative.”
Stating that “the narrative is helping drive money into bitcoin with a 30% gain in the last week,” the professor opined:
My feeling is when people feel they’re safe in the banks again, bitcoin will go back down. But in the meantime, it’s certainly enjoying a story that was put in hibernation for the last 6-9 months.
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