This is the best tl;dr I could make, original reduced by 87%. (I'm a bot)
The event doesn't mean another financial meltdown is necessarily imminent-just that the risk of one is heightened-since the brush fire can be doused either by the Fed, or by the banks raising more equity capital.
US Treasuries are the core asset used by every financial institution to satisfy its capital and liquidity requirements-which means that no one really knows how big the hole is at a system-wide level.
Specifically, the Fed's focus on the fed funds market is misplaced because the real action is in the much bigger, much more global repo market; the Fed shouldn't have allowed America's big banks to pay dividends or buy back stock when they're so capital-constrained that they can't even pick up an 8% "Risk-free" arbitrage; the Fed's proclamation that "The financial system remains resilient," when it released the results of the most recent bank stress tests.
At a systemic level, the traditional financial system is as fragile as Bitcoin is anti-fragile.
In stark contrast to the traditional financial system, Bitcoin is not a debt-based system that periodically experiences bank run-like instability.
In this regard, Bitcoin is an insurance policy against financial market instability.
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