Cash is King! Cash deposits at US banks are piling up, is Bitcoin's shining moment coming soon?

According to the latest data released by the Federal Reserve, commercial banks in the United States have increased their deposit balances by $2 trillion since the beginning of the year, and the personal savings rate reached a record 33% in April. Currently, there is a mountain of funds deposited in banks. Could this be an opportunity for the widespread adoption of Bitcoin?

Mountain of Bank Cash Deposits

Under a series of monetary policies implemented by the Federal Reserve, the general expectation was that the public would choose to inject funds into the financial markets due to low interest rates, injecting more hot money into the market. However, despite the swift recovery of the U.S. stock market after the March plunge, many people still prefer to hold cash as a safe haven rather than invest in the market. According to the latest data released by the Federal Reserve on June 19th, a record $2 trillion in cash has poured into U.S. commercial banks since the impact of the COVID-19 pandemic in January. As reported by CNBC, bank deposits increased by $865 billion in April alone, reaching an unprecedented level in U.S. deposit history. Currently, funds held in bank accounts amount to $15.4 trillion.

A significant amount of funds can be attributed to the U.S. government providing trillions of dollars in relief to taxpayers to help its citizens recover from financial losses caused by the lockdowns due to the COVID-19 pandemic. Through the Federal Reserve's policy of unlimited quantitative easing to purchase government bonds to alleviate the economic crisis caused by the pandemic, the U.S. Bureau of Economic Analysis stated last month that the personal savings rate reached a record 33% in April. With people unable to spend during the pandemic and the uncertainty in the market environment, most individuals choose to hold fiat currency (USD) and keep these funds in bank accounts as a safe haven.

Major U.S. banks such as JPMorgan Chase, Bank of America, and Citigroup have seen significant increases in their deposit balances. Large banks and their offshore branches have utilized these deposits as a primary advantage in the post-financial crisis era, as these deposits serve as the cheapest source of loan funds that can generate record revenues for the industry even in a low-interest rate environment. However, according to analyst Brian Foran, during an economic recession, banks may also be relatively cautious in lending, and faced with a mountain of cash, banks are unsure how to handle these funds. Brian Foran stated:

"Many banks have indicated that they are now limited in what they can do, as their deposit balances exceed what they know how to deal with."

Bitcoin as a Safe Haven

On the other hand, U.S. economist Stephen Roach recently predicted that the seemingly endless supply of cash globally (not just in the U.S.) could lead to a sharp decline in the value of the U.S. dollar, and many believe that this situation could benefit Bitcoin.

Supporters of this theory believe that continuous quantitative easing and money printing, while able to rescue the financial markets in the short term, will inevitably lead to severe inflation in the long run. Bitcoin, as a tool for hedging against inflation, is fundamentally unrelated to the global market including the U.S. dollar and is considered a relatively safe choice during market crises, serving as a safe haven for assets. Many prominent figures, including legendary U.S. hedge fund manager Paul Tudor Jones and "Rich Dad Poor Dad" author Robert Kiyosaki, support this "safe haven theory." With massive amounts of cash being released from central banks worldwide, the crisis of inflation is quietly brewing, prompting people to bet their assets on other assets, such as Bitcoin.

Will this be an opportunity for Bitcoin to rise in the mainstream market?