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(Kitco News) - $10 trillion in equity could be "wiped out" from the banking system as more banks fail, according to Greg Foss, Bitcoin Strategist and Executive Director at Validus Power Corp.
Foss, who has more than three decades of experience in high-yield credit trading, responded to Federal Reserve Chair Jerome Powell's recent statement that the U.S. banking sector is "sound and resilient," which Powell made at the FOMC Press Conference on Wednesday.
"I think Jerome Powell is a horrible poker player," Foss told Michelle Makori, Lead Anchor and Editor-in-Chief at Kitco News. "There's another shoe to fall [for banks], or as Elon says, it could be an anvil."
Foss cited Elon Musk who claimed, in an interview with former Fox News host Tucker Carlson, that more banks will fail as commercial real estate loans default . Foss said "a lot more" banks could collapse.
"The biggest banks are too big to fail, which means they will get bailed out," he observed. "But that doesn't mean that shareholders get bailed out, and this is where a lot of money can be lost. There are probably, by my estimation, at least $10 trillion of bank equity globally that can literally be wiped out if the system fails."
Soft Landing
The Federal Reserve hiked interest rates by 25 basis points on Wednesday, in line with market expectations. The rapid pace of Fed hikes, which amount to 500 basis points in little more than a year, has caused Fed staff to forecast a recession.
Fed Chair Powell disagreed with the projections and suggested a soft landing is still possible.
"This is the first time in my history that I've seen the Fed, as a group, predicting a recession," claimed Foss. "I don't think he [Powell] is going to be able to thread the needle on this soft landing."
Foss stated that, at this point, "it doesn't matter" what the Fed does because of "the restriction in credit standards" due to failing banks, which will cause a contraction in the real economy.
"This is not monetary policy now," said Foss. "This is a question of leverage coming out of the system."
To find out how Foss is positioning himself for future economic risks, watch the video above
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| Banking crisis will escalate if commercial real estate collapses, gold could reach $3k in 2024 - Andrew Axelrod |
Bitcoin and U.S. dollar collapse
Foss, a long-time Bitcoin advocate, argued that owning Bitcoin reduces investors' risk exposure, as it's a hedge against U.S. debt and dollar collapse.
"You can look at Bitcoin as being insurance on the failure of a basket of fiat currencies," he claimed. "$200 trillion is the liability just of the United States. You take 160 [basis points] times $200 trillion and you get… $3.2 trillion would be the implied insurance value on the United States… What is Bitcoin trading for? Well, about half-a-trillion dollars."
To find out why Foss thinks Bitcoin is worth $700,000 and when it will reach that amount, watch the video above
Gold and Bitcoin
Although he argued that Bitcoin is a "superior" technology, Foss said that gold is good asset for investors to keep in their portfolio.
"Don't sell gold to buy Bitcoin," he said. "Sell part of your bond portfolio to buy Bitcoin. Because if you own 0% Bitcoin, you are actually taking on more risk.
To find out the optimal Bitcoin allocation that Foss recommends, watch the video above
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