Silicon Valley Bank (SVB) has come under the spotlight after its collapse prompted the US Federal Deposit Insurance Corporation (FDIC) to close the bank on Friday. It was the largest U.S. bank failure since 2008, and various alleged catalysts were pointed to. Some believe venture capitalists have caused a panic in the banks, while others blame the US Federal Reserve’s interest rate hikes. Economist and gold bribe Peter Schiff said Friday that the US banking system will face more problems in the future. He and several speculators believe these financial institutions hold mountains of long-term vaults.
He calls for SVB intervention as market watchers predict a bigger US financial collapse
Over the past week, two US banking institutions, Silvergate Bank and Silicon Valley Bank (SVB), have collapsed. SVB’s collapse was the biggest banking failure since Washington Mutual (Wamu) in 2008, blamed on expanding branches too quickly and keeping massive amounts of subprime mortgages lent to so-called unqualified buyers.
Before its collapse, Wamu held $188.3 billion in deposits, while SVB lost approximately $175.4 billion in deposits. However, while SVB deposits totaled $175.4 billion at the end of December 2022, customers attempted to remove $42 billion on Thursday alone. It’s safe to say that SVB’s demise happened much faster than Wamu’s demise at the end of 2008.
A few days before its collapse, SVB tried to bolster its balance sheet by announcing the need to raise $2.25 billion. The bank also sold its Available-For-Sale (AFS) bond portfolio for $21 billion, resulting in a loss of $1.8 billion on the sale. The SVB is well known for banking technology and venture capital (VC) fund start-ups, and some market observers believe these clients have caused a bank panic.
“It was a VC hysteria-driven bank run,” Ryan Falvey, a fintech investor at Restive Ventures, told CNBC on Friday. “This will be remembered as one of the ultimate cases of an industry cutting off its nose to spite its face,” he added.
Other analysts and market watchers blame the illogicality inverted yield curve what are long-term and short-term treasury bonds facing todayand the US Federal Reserve interest rate increases. Soona Amhaz, founder and managing partner at Volt Capital, he said“It’s an open secret that technically most American banks are now bankrupt because they all have long-term Treasury securities that are under water in a 4% interest rate environment.”
Economist and goldsmith Peter Schiff shares a view similar to Amhaz’s, expecting a much bigger financial collapse in the United States. “The US banking system is on the brink of a much bigger collapse than it was in 2008. Banks hold long-term securities with extremely low interest rates,” says Schiff. he stated. He continued:
They cannot compete with short-term government bonds. Mass withdrawals by depositors seeking higher yields will trigger a wave of bank failures.
Craft Ventures CEO David Sacks tweeted an appeal for Powell to intervene and prevent possible contagion. “Where is Powell? Where is Yellen? Stop this crisis NOW,” Sacks tweeted. “Announce that all depositors will be safe. Place SVB with a Top 4 bank. Do it before Monday’s opening, otherwise there will be contagion and the crisis will spread.”
Billionaire and Galaxy Digital founder Mike Novogratz also chimed in, expressing surprise that the Fed allowed depositors to lose money at Silicon Valley Bank. “Will all banks be treated as hedge funds? It seems like a political mistake.” — Novogratz he stated. Shapeshift founder Erik Voorhees ridiculed a call for intervention by the Fed on Twitter, stating “Fiat is fragile.”
The SVB problems have affected the crypto economy, in particular the stablecoin economy supported by fiat reserves. Wheel revealed that he had $3.3 billion of cash backing USD (USDC) coin trapped in the bank, causing the USDC to break away from parity with the US dollar. As of 10:30 AM on March 11, 2023, USDC is $0.912 each. This unbinding also led to five other stablecoins losing their pegs. Additionally, on Saturday, Coinbase, Binance and Crypto.com temporarily suspended USDC transactions and conversions.
What do you think about the opinions surrounding the SVB crash? Share your thoughts in the comments section below.
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