• On March 10, California regulators officially shut down Silicon Valley Bank (SVB) 48 hours after the company disclosed it was in financial distress.
• The news triggered a fire sale in crypto and financial markets as SVB was a top-20 U.S. bank by total assets.
• Federal regulators stepped up to backstop SVB depositors before a bank run could ensue & USD Coin (USDC) depegged from the Dollar.
Silicon Valley Bank Collapses
On March 10, California regulators officially shut down Silicon Valley Bank (SVB) 48 hours after the company disclosed it was in financial distress. SVB was a top-20 U.S. bank by total assets, and its collapse created turmoil in traditional finance that spilled over into Bitcoin and crypto markets.
In response to SVB’s failure, federal regulators stepped up to backstop SVB depositors before a bank run could ensue. Washington announced that all depositors would be protected and President Joe Biden confirmed that shoring up depositors would not cost the taxpayer anything. However, this did not stop USD Coin (USDC) from depegging from the Dollar due to Circle’s decision to hold deposits at SVB when it collapsed.
Crypto Markets React
The news of SVB’s failure caused fear and trepidation in crypto markets as investors worried about the implications of another large institution collapsing so soon after Archegos Capital Management imploded earlier this year. Nevertheless, Bitcoin (BTC) and the broader crypto market still managed to soar despite these fears, suggesting that FDIC bail out of Bitcoin may have occurred despite its lack of official confirmation at this time.
Long Term Implications
It remains unclear what long term implications will result from SVB’s collapse but investors should know by now that it doesn’t take much to topple a distressed multi-billion-dollar firm like SVB. Moving forward, investors should keep an eye on how federal regulations respond whenever another large institution fails since their actions can often determine whether or not crypto assets remain safe investments during times of crisis or chaos in traditional finance arenas such as banking or stock markets for instance..
Overall, although Silicon Valley Bank has collapsed after disclosing its mid-quarter financial update which revealed losses totaling $1.8 billion dollars, federal regulations have been quick enough to step up and protect all depositors who had money invested with them thus averting any potential bank runs from occurring while also preventing USDC from fully depreciating against the Dollar due to Circles’ decision of holding deposits at their failed institution . Despite fears initially rising within Crypto markets following the news however Bitcoin(BTC)and other cryptos still managed to soar which may suggest FDIC intervention was present yet again albeit unconfirmed at this point in time -so only time will tell if they actually bailed out BTC once again or not