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These turbulent times of banking
What happens on the market, what comes next and what can we all do (don’t worry, it will be all good!)
The craziest banking week since 2008
Public and private markets are busy analyzing and going on after the heated weekend that took on with the collapse of the Silicon Valley Bank late last week. New York state regulators closed Signature Bank on Sunday, a major lender in the crypto industry, in an attempt to prevent the banking crisis from spreading. Banking regulators stated the Signature Bank depositors to have full access to their deposits to guarantee depositors of the bankrupt Silicon Valley Bank to have their money returned.
Signature Bank was one of the main banks in the cryptocurrency industry, the largest after Silvergate, which announced its impending liquidation last week. It had a market value of $4.4 billion as of Friday, after a 40 percent selloff this year, according to FactSet. As of December 31, Signature Bank’s total assets were $110.4 billion and total deposits were $88.6 billion, according to the Securities Report.
The client reaction
After the raid on the Silicon Valley Bank, an institution where many venture capitalists and startups kept their money, the bank was turned over to the US government after savers ran to get their capital from the institution.
Fears that thousands of startups and other companies will be unable to pay salaries and other expenses this week have spread across both American and European markets. The Federal Deposit Insurance Corporation offers coverage up to $250,000 for business and personal accounts.
While ones stated that savers needed to be rebuilt quickly to allow SVB-backed companies to earn wages and prevent wider spread, others argued that SVB customers deserved to suffer because they concentrated their banking activities in a smaller institution and then pulled out their cash in a panic when the bank faltered. All these talks reveal deep business and personal scars that date back to the 2008 banking crisis. This explains why some people had a reflex reaction against using government resources to solve the current situation.
The competitor reaction
Silicon Valley Bank (UK) Ltd was sold to HSBC. Headquartered in London, HSBC is the largest bank in Europe and one of the world’s largest banking and financial institutions, serving 39 million customers worldwide. From now and on, Silicon Valley Bank UK customers will be able to access their deposits and banking services as usual.
This transaction was facilitated by the Bank of England, in consultation with the Treasury, using the powers granted by the Banking Act 2009. Taxpayer money is not involved and customer deposits are protected. Leveraging post-crisis banking reforms that provided powers to safely manage bank failures, this sale protected both SVB UK clients and taxpayers.
The market reaction
Cryptocurrencies rose this Monday, even after regulators announced the shutting down of the Signature Bank, being the last major crypto bank in the US.
Bitcoin is already up over 15% to $24,382.98 and is now around 19% above Friday’s levels, according to Coin Metrics. Ever since the January risk asset rally began to fade, chart analysts have been looking for a meaningful break above $25,000. Ethereum rose over 9% up to $1683.20.
The jump in risky assets came after US regulators on Sunday evening announced plans to support all depositors of the bankrupt Silicon Valley bank and provide additional funding to other banks.
The end of the Silvergate-Signature duo leaves the cryptocurrency with multiple “entry ramps” that allow fiat money to flow into crypto assets. They helped solve this problem by creating simple banking services and payment platforms for crypto companies; namely, the Silvergate Exchange network and the Signature Signet platform.
The crypto ecosystem was built on the belief that no single entity, i.e. a bank, should be in charge of one person’s finances, but until that becomes a reality, traditional banking will likely have to serve as a bridge between centralized finance and decentralized finance.
As such, the closure of Silvergate Bank, Silicon Valley Bank (SVB), and Signature Bank will certainly cause headaches for the industry in the short term as many crypto companies look for new banking partners, not knowing if larger organizations will want to touch crypto at all. companies in the near future. Yet, in the long prospective, this contagion should not hurt the crypto industry as other smaller banks are likely to emerge and likely fill the gap.
Circle and USDC are still standing
Looks like Circle has the superpower to quickly find an automated settlement partner. The stablecoin issuer found itself in the middle of chaos as its USDC depegged its $1 theoretical value after it was revealed that around $3.3 billion of USDC cash reserves were stuck in SVB and that it could no longer mint or redeem USDC through the product. However, by Sunday evening, Circle was able to find a new automated bank settlement partner with Cross River Bank, allowing it to continue operations on Monday.
Perhaps a potential solution for crypto companies would be to look outside the US for potential banking partnerships and pursue stablecoin-related strategies. The current banking crisis would definitely make the crypto providers and projects even stronger as this situation initiates a great step ahead.
Quppy is fully safe and stands by the users
The Quppy neobank is not affected by the current market situation. All the fiat and crypto funds of the Quppy Wallet users are 100% safe while the Quppy operations continue in normal regime. The Quppy Support Team is 24/7 ready to assist users and sort out their doubts in the current changing situation.
Getting the most of it
When someone means crisis, other means opportunity. Even the most turbulent situation might bring us a significant profit. After every ending comes a new beginning. Thus, being informed of the changes and getting the best of prices and values is one of the best ways together with keeping calm and moving on.