Deutsche
Bank taking an axe to 18,000 jobs and winding down its investment
banking arm paints a bleak picture of traditional finance at a time of
booming growth for crypto.
As reported
by Reuters on July 7, Deutsche Bank’s momentous decision will entail
the bank exiting its equities sales and trading business — which had
reportedly raked in €1.96 billion ($2.20 billion) in revenue in 2018.
While
retaining a small-scale equity capital markets business, DB also plans
to rein in its fixed-income business — in particular, its rates trading
desks — Reuters notes.
The move carries an expected toll of around
18,000 jobs and a 40% shrinkage of risk-weighted assets currently
allocated to DB’s trading operations — representing €74 billion ($83.06
billion), and €288 billion ($323.5 billion) of leverage exposure as of
Dec. 31, 2018, according to Reuters.
In a tweet published July 7, Morgan Creek Digital Assets co-founder Anthony “Pomp” Pompliano interpreted the news as a robust endorsement for bitcoin (BTC) adoption, remarking:
“Deutsche
Bank plans to fire almost 20,000 employees. Bitcoin has no employees to
fire. DB is built for the old world. And Bitcoin is built for the new
world.”
In his own analysis of the ailing banking
sector, eToro analyst Mati Greenspan proposed that DB’s move represents a
broader policy failure by the stewards of global monetary policy, noting:
“This
is the effect of prolonged zero interest rate policy. Central Banks are
making it impossible for investment banks to turn a profit. Even the
riskiest bonds around are yielding <2%. How can they be expected to
make money from that?”
Greenspan’s opinion has today been echoed in rolling news from major U.K.
broadsheet The Guardian, which in addition points to DB’s encumbrance
with billions of euros of derivatives contracts. Many of these will
purportedly be turned over to its newly-created “bad bank,” — a
so-called Capital Release Unit, tasked with managing the wind-down of
DB’s investment banking assets.
Notably, Jim Reid — head of global fundamental credit strategy at DB — had remarked
that central banks’ dovish policies were positively impacting
“alternative” currencies such as bitcoin while hurting investment banks.
He said:
“if central banks are gonna be this aggressive, then alternative currencies do start to become a bit more attractive."
Moreover,
the fact that DB’s decision broke on a Sunday points to yet another
Achilles Heel for traditional finance, according to VanECK digital asset
strategist and MVIS director Gabor Gurbacs, who tweeted:
“Crypto
markets are at least open 24/7 to act on news. In traditional markets
some just have to wait until market open to get hammered on news that
are public information. To me this appears to be a serious market
structure problem! It’s time for plan ฿!”
As one former equities broker today told BBC radio, the Deutsche Bank revelation is viewed by many as an inevitable and belated wake-up to the aftermath of the 2008 crash — the very cataclysm that Satoshi wryly alluded to within the bitcoin genesis block over a decade ago.
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