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.
“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.