Crypto Opinions & News Silicon Valley Bank explained: How crypto is being affected

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vtqhtr413

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If you haven't heard of Silicon Valley Bank before, it was a commercial bank that largely served the tech industry. Tech companies and venture capital both banked with the company, which was more willing than other traditional banks to lend money to VC-backed startups that may have been lacking in cash flow. "We bank nearly half of all US venture-backed startups, and 44% of the US venture-backed technology and healthcare companies that went public in 2022 are SVB clients," the bank proudly highlighted on its website. While Silicon Valley Bank made risky investments, what really appears to have harmed the bank was the pandemic. Or, really, what it did due to the tech sector's success during the early days of the pandemic.
 

cruelsister

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What is killing them is what is termed an inverted yield curve- the current interest rate on a 30 year Treasury Bond is ~3.8%, while the current rate on a 1 month Treasury Bill is ~4.6%.

So many are dumping the Bond (pushing the actual value of it lower) and are pumping cash into the T-Bills. SVB was in the process of doing this but couldn't act quickly enough (maybe next week...).
 

vtqhtr413

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At least one Wall Street firm is sensing an opportunity in the panic around failed Silicon Valley Bank. Traders from Jefferies are contacting startup founders with money stuck at the bank, offering to buy their deposit claims at a discount, according to several people with direct knowledge of the matter. The firm is offering at least 70 cents on the dollar for deposit claims, one of the people said, although that price is likely to change. The team is having conversations with startups over the weekend, according to a person familiar with the matter, although it hasn’t yet done a deal. Startups’ interest in selling their deposits could intensify by early next week, if there’s no sign that the FDIC will quickly find a buyer for SVB’s assets.
 
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ForgottenSeer 98186

I wonder if their interest is driven by Elon Musk stating he ~"would be open to the idea" of buying SVB out.
Probably for some. Just remember, the crypto worshipping minions reacted like locusts in a corn field when Elon Musk started to make posts about Shibu Inu. The joke turned out to be on them.
 
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oldschool

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raders from Jefferies are contacting startup founders with money stuck at the bank, offering to buy their deposit claims at a discount,
The vultures are circling. They'll eat roadkill, but only of a certain age, which they can smell from altitude.
 

cruelsister

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As short term Treasury Notes now have a larger yield than any Bank account (and in the US the latter only is guaranteed to 250K), I wonder how many of those primarily in cash will pull out cash this week across the entire banking sector and go into T-Bills, Gold, or Silver.

Note to the non-economists- a Bank Run is Double-Plus Ungood for everyone.
 

vtqhtr413

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Breaking news from CNN: Treasury Secretary Janet Yellen on Sunday instructed the Federal Deposit Insurance Corporation to guarantee Silicon Valley Bank customers will have access to all of their money starting Monday. By guaranteeing all deposits — even the uninsured money customers kept with the failed SVB bank — the government can ensure public confidence in America's banking system, said Yellen, Federal Reserve Chair Jerome Powell and FDIC Chairman Martin J. Gruenberg in a joint statement.... The FDIC opened an auction Sunday for bids to acquire the bank, the Treasury Department said in a briefing with lawmakers in the California delegation, two sources familiar with the briefing told CNN.... Under Secretary for Domestic Finance Nellie Liang and Assistant Secretary for Legislative Affairs Jonathan Davidson led the briefing, during which they told members that the FDIC is prepared "to operate the institution" to ensure depositors can maintain payroll for their employees and that more operations will emerge in coming days, one of the sources said. The treasury secretary's statement clarified that "No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer." We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority. All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer Shareholders and certain unsecured debtholders will not be protected. Senior management has also been removed.
 
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ForgottenSeer 98186

Complete buggery. Everyone realizes that the US taxpayers are again bailing out the rich and rich corporations, right? I don't care if it would cause a financial crisis, it should be allowed to fail utterly. Bailouts by taxpayers should not happen anywhere in the world. Did the world not learn anything from 2008?
 

Zero Knowledge

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I don't care if it would cause a financial crisis, it should be allowed to fail utterly. Bailouts by taxpayers should not happen anywhere in the world.
Ahh maybe where you live (Russian 🇷🇺 troll farm most likely! :unsure: No offense! I personally like Ruski's, imho hard but decent people ✌️) but you can bet the rest of the world would care. There are corporations that are TOO BIG to fail and would have catastrophic effects on the world if they would indeed fail. The financial systems of the world are now fully interconnected and globalised. Cotangent is a real risk in failures so one business failing has a flow on effects to the rest of the economy. In such cases bailouts are needed, does it leave a good feeling knowing taxpayers are propping up corporations that have been run badly and gone bankrupt? NO! But there is no other choice but to use taxpayer funds to bail them out, doing nothing and letting the world economy sink into depression is even worse.
 

vtqhtr413

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Bitcoin is way, way up in spite — or, perhaps, because — of the tumult in the rest of the financial world. As Decrypt notes, the cryptocurrency rose nearly 20 percent in value over the last 24 hours alone, with the price currently hovering around $24,000, the highest it's been in over a week. The crypto market on the whole shot up $70 million over roughly the same time span, CNBC reports, bringing the market back to over the $1 trillion threshold. The surge comes on the heels of regulators shutting down Silicon Valley Bank and crypto lender Signature Bank, as well as the fall of Silvergate Capital, which also lent to the crypto sector. To be clear, it's not just a coincidence; these two seemingly opposite trajectories are likely related
 
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Paul.R

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Bull trap feeling...

Argument:

The bottom line shows the gap or difference between the two rates, indicating markets believe the Fed will not be able to maintain its rate. The top figure compares the 2 year Treasury to the present Fed Funds Rate (the interest rate the Fed has set).

source: ZeroHedge
FrGcTZmXgAAKLWA.jpg
 
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vtqhtr413

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Isaiah Deporto Plick, co-founder of pre-seed venture fund Fuerza Ventures, told GeekWire he already wired money back into an SVB account. Plick, a former corporate development manager at SVB, said the bank has been instrumental in supporting the innovation ecosystem, particularly in the venture debt market and promoting diversity. Jason Stoffer, partner at Maveron, said some founders who thought their venture debt lines would go away are now thinking about re-establishing a relationship with SVB, which was the leading provider of venture debt.
 

vtqhtr413

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Brex CEO Henrique Dubugras found himself playing an important role during the Silicon Valley Bank collapse.
Brex is what you might call a neobank — not a traditional bank but, rather, a financial services provider that helps companies manage how they spend money, corporate cards, travel expenses, and the rest. In the middle of the SVB collapse, Brex was more than just a spending management company. It was also a safe place to park money. Brex saw billions of deposits in a very short period of time, giving Dubugras a bird’s-eye view of what was happening — and what was happening was not great for the banking system, especially in Silicon Valley. (Our own Liz Lopatto has been covering this in depth.)

 
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vtqhtr413

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The JPMorgan CEO instead called for more forward-looking regulation. He pointed out that the held-to-maturity bonds that have become problems for many banks are actually highly rated government debt that scores well under current rules, and that recent stress tests did not game out a rapid rise in interest rates. “This is not to absolve bank management – it’s just to make clear that this wasn’t the finest hour for many players. All of these colliding factors became critically important when the marketplace, rating agencies and depositors focused on them,” Dimon wrote.
 

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