023 – The collapse of the American entity is already considered the largest bank failure since the Great Recession and one of the most important in U.S. history, but it benefits the world of cryptocurrencies.
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In early March, Silicon Valley Bank, or SVB, collapsed. This event caused one of the most resounding banking panics of recent times, especially affecting thousands of startups and venture capital funds. It has even had an effect on the world of cryptocurrencies.
The collapse of the American institution is already considered the largest bank failure since the Great Recession and one of the most important in the history of the United States.
The failure of Silicon Valley Bank (SVB) blocked tens of billions of dollars deposited there by start-ups and private equity funds.
But what actually happened? Silicon Valley Bank was a subsidiary of SVB Financial Group and had a large number of startups and venture capital funds among its clients. The bank, headquartered in Santa Clara, California, is the 16th largest lender in the country. At year-end 2022, it had assets of approximately $209 billion and deposits of approximately $175.4 billion, according to data from the Federal Deposit Insurance Corporation (FDIC). Silicon Valley Bank announced a large capital increase of US$1.75 billion to address the US$1.8 billion loss the bank had previously recorded from the sale of a portfolio of mortgage-backed fixed-income securities worth approximately US$21 billion.
On the same day, the bank’s shares plunged by 60%, which caused an outflow of investors: in 24 hours, $42 billion dollars were outflowed, generating losses of 68%.
California banking regulators closed SVB, appointing the Federal Deposit Insurance Corporation (FDIC) as receiver to protect depositors. SVB customers will have access to all of their deposits and regulators established a new mechanism to give banks access to emergency funds.
“Americans can have confidence that the banking system is safe,” President Joe Biden said from the Roosevelt Room. “Their deposits will be there when they need them.” But these statements left a bitter taste in the general public.
This phenomenon has benefited the crypto world because it is further evidence that the old centralized ways of handling finances are becoming obsolete and are less and less trusted. Last Monday, March 13, some of the main cryptocurrencies experienced an imported rise in the day, as a consequence of the uncertainty generated by the Silicon Valey Bank (SVB) case.
The bitcoin (BTC) remains at an average price of US$24,012, with a high of US$24,061 and a low of US$21,723 and a rise of almost 19%. Last Friday, the cryptocurrency closed lower at US$20,558.
Adding to SVB’s, another reason driving today’s behavior is the announcement that the stablecoin issuer USD Coin would remain redeemable against the dollar.
Meanwhile, Ethereum (ETH) was at US$1,700 in early morning trading, up 15%.