#SVB #bankcollapse #Binance #crypto2023

What was the recent collapse of SVB about?

The recent collapse of Silicon Valley Bank (SVB), which was the second-largest bank failure in US history. SVB primarily served tech businesses and saw an increase in deposits due to low-interest rates. However, SVB faced a problem as banks typically make money through loans rather than deposits and low interest rates made it difficult to earn a significant profit. To counter this, SVB invested in US Treasury bonds to achieve a slightly higher interest rate on its loans. Unfortunately, interest rates hiked causing the value of SVB’s bond portfolio to plummet and their old US Treasury bonds now paid out lower interest rates.

This significant loss created a challenging situation for SVB as they had invested a majority of their depositors’ funds in long-term bonds that had significantly depreciated in value. In addition to this, the higher interest rates made it harder for tech businesses to borrow money which led them to draw upon their cash reserves at SVB. In the process of meeting their own liquidity needs, they drained SVBs.

Risks of having over $250,000 in a single entity bank account

It's essential to assess your risk by knowing how much your deposits are insured for and how easily and often you can withdraw; considering diversification by holding different asset classes or holding deposits in multiple banks; and doing your due diligence by researching before making any financial decisions. The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by Congress to maintain stability and public confidence in the nation’s financial system. The FDIC insures deposits; examines and supervises financial institutions for safety, soundness, and consumer protection; makes large and complex financial institutions. The FDIC protects and reimburses your deposits up to the legal limit of $250,000 if your FDIC-insured bank fails.

What happens to those that have more than $250,000 in an individual bank account?

Some wonder what happens if you have more than $250,000 in an individual bank account. However, If you have over $250,000 in individual accounts at one bank, the amount over $250,000 is considered uninsured and financial advisors recommend that you move the remainder of your money to a different financial institution. Another way to protect your money is to deposit it in different account categories or open accounts with different banks, essentially moving away and diversifying.

Simple tips for protecting your assesets/funds

 Some steps you can take include not clicking on attachments or links sent by unknown sources, never giving out your personal information like Social Security number or driver’s license number. Checking your bank account daily and credit card accounts at least once a month. Using strong passwords and two-factor authentication for all online accounts and being careful about where you access financial accounts. You can also keep your money liquid by investing in various types of banking products or fixed-income securities backed by large stable organizations like corporations and the government or in stable and well diversified platforms such as Binance.

#SVB #bankcollapse #Binance #crypto2023 #BTC

Why did Silicon Valley Bank Collapse?

After a hectic 48 hours in which clients frantically withdrew savings from the lending institution in a traditional run on the bank, SVB abruptly collapsed. However, the cause of its downfall has been simmering for a while. Like numerous other financial institutions, SVB poured billions into US government assets during the period of near-zero interest rates. As the Federal Reserve aggressively increased interest rates to control inflation, what initially appeared to be a secure wager soon unraveled. Bond values decline as interest rates rise, so the increase in rates reduced the worth of SVB's bond portfolio. The collection was producing an average 1.79% return last week, far below the 10-year Treasury yield of around 3.9%. At the same time, rising financing costs were a result of the Fed's rate hikes.

What the US President Did to Protect the Financial Markets?

With the collapse of US Silicon Valley Bank and US President Joe Biden's subsequent attempt to convince consumers that the US financial system was safe, bank stocks throughout the world plummeted. This comes after US authorities were forced to intervene to preserve consumer deposits following the bank's failure.

Joe Biden has committed to go to whatever length to safeguard the financial sector.

But, investors are concerned that the impact would affect other lenders, sending global share values falling.

Despite promises to clients that they had enough liquidity to defend themselves against shocks, a handful of smaller US banks incurred even larger losses than European banks.

Will Depositors and Investors be Covered?

The deposits of all Silicon Valley Bank clients will be guaranteed, US authorities announced on Sunday. The action aims to stop further bank runs and assist tech firms in continuing to pay employees and finance their operations. On March 9, 2023, Silicon Valley Bank's offices will be located in Santa Clara, California, in the US. Bonds issued by SVB Financial Group are falling along with its stock as a result of the company's decision to increase capital following losses on its securities holdings and a decrease in financing. US authorities state that as a second bank fails, SVB clients will be compensated. But because the action falls short of a rescue in the mold of 2008, holders of the company's shares and bonds won't be covered.

How HSBC UK Saved the Day in Britain

With its intervention on Monday, HSBC secured the assets of thousands of British tech firms by purchasing SVB UK for £1 ($1.2). If a buyer hadn't been located, the Bank of England would've declared SVB UK insolvent, rendering clients with only guaranteed deposits valued up to £85,000 ($100,000) or £170,000 ($200,000) for joint accounts. The deal "strengthens our commercial banking franchise and enhances our ability to serve innovative and fast-growing firms, including in the technology and life science sectors, in the UK and internationally," said HSBC CEO Noel Quinn in announcement.

Veteran investor and Shark Tank star Kevin O’Leary warns that more regional banks could go under as they face immense losses from their exposure to one sector of the economy.

In a new interview on the Meet Kevin YouTube channel, O’Leary says that the commercial real estate sector will likely put a lot of pressure on equity holders, including regional banks.

O’Leary says that investors in commercial real estate will likely get wiped out in the next two years.

“The majority of risk right now in the infrastructure of both regional and money center banks is commercial real estate... We have 11 sectors in the economy. The 11th, the newest is real estate…

The majority of debt that was done in very liquid times with very low rates starts to come due in Q3 and Q4 of 2024. So the defaults will start then and then the peak of it, the refinancing in 2025, is going to be very high.

That’s when all of a sudden the economics of a lot of commercial real estate don’t make sense, it’ll be upside down.

And the equity holders in those real estate buildings, they will go to zero.”

According to O’Leary, the commercial real estate sector will likely trigger a period of weakness in the economy for the next year and a half. The Shark Tank star goes on to say that commercial real estate could eradicate hundreds of billions of dollars worth of investments and trigger the downfall of more regional banks.

“I think we’re going to have a period of softness for maybe 18 months…

It could be that long, and it probably will be triggered by this colored pig in the python of commercial real estate. It’s got to go through the belly.

It’s a really big $0.5 trillion loss, has to be absorbed. It will wipe out 15% of the regional banks.”

source: dailyhodl

#bank #bankcollapse #newsbrief #newsupadet #dyor

Disclaimer

The views and opinions expressed by the author, or any people mentioned in this article, are for informational purposes only, and they do not constitute financial, investment, or other advice. Investing in or trading crypto assets comes with a risk of financial loss.

Key points

BTC has surged over 8% in the past 24 hours following the news of First Republic Bank’s share slump. 

The price gain was recorded across the board as the top 25 digital assets by market capitalization bounced positively with BTC. 

Technical indicators show that BTC may continue to rally after gradually breaking the correlation from the S&P 500.

In April, Bitcoin (BTC) and Ethereum (ETH) reached new heights, surpassing recent records as bullish investors continue to exert pressure in the aftermath of recent traditional financial institution failures.

BTC has been on a steady upward trajectory following news of further struggles at First Republic Bank, increasing by 8.88% over the past 24 hours and breaking past the $28,500 barrier to trade at $29,839 at the time of writing.

Jake Boyle, a director at crypto brokerage Caleb & Brown, has expressed his opinion on the matter, stating that banking failures have led to a renewed positive outlook in the market. He believes that "the market is anticipating yet more liquidity injections to prop up what certainly seems to be an American banking sector that is still very much in the throes of crisis."

The price rally was ignited just hours after a Fox Business Reporter broke the news that bankers working with the institution expected it to go into government receivership. A receivership is a corporate restructuring model that allows creditors to recover funds and firms to avoid bankruptcy.

Additionally, other assets within the top 25 have also recorded slight gains, with Solana leading the pack with a 9% increase. The leading altcoin, ETH, gained 7.36% after experiencing a recent price correction that wiped away gains from the Shanghai upgrade. Dogecoin, Polkadot, and Polygon also recorded slight gains.

Bitcoins break away from stocks

Throughout most of 2022, BTC and stock prices appeared to have a strong correlation, with investors abandoning risky assets due to interest rate hikes by the Federal Reserve. However, new data from crypto analytics firm Santiment suggests that the relationship between BTC and the S&P 500 may weaken as investors increasingly view Bitcoin as a safe haven amidst the ongoing troubles in traditional banking.

First Republic Bank first faced difficulties in March, prompting major banking institutions such as JPMorgan to deposit $30 billion into the beleaguered bank. Later that month, US authorities considered creating an emergency lending facility to aid in the restructuring of the bank's balance sheet.

On April 23, the bank reported its Q1 earnings, revealing that deposits had dropped by over $100 billion and that it was exploring "strategic options" to address the situation.

#BTC #bank #bankingcrash #bankcollapse #crypto2023

Source: zycrypto

image Source: pixabay

If you enjoy our content and want to show your support, please like, share, and follow us for more high-quality updates.

Disclaimer

The views and opinions expressed by the author, or any people mentioned in this article, are for informational purposes only, and they do not constitute financial, investment, or other advice. Investing in or trading crypto assets comes with a risk of financial loss.