Silicon Valley Bank collapsed, ETH fell to 1380 overnight, Bitcoin fell to 19521. It is said that one day in the cryptocurrency world is like one year in the real world. In this two-day weekend, the cryptocurrency world seemed to have experienced spring, summer, autumn and winter.
From the three arrows crash, Luna plummeted by almost 99%, to the collapse of FTX SVB (Silicon Valley Bank) at the end of last year, this is the fourth crash. From investment institutions, currency exchanges to banks, no one is spared.
Including the crazy HT in the past two days, which directly exploded the positions of large investors.
First Republic Bank fell more than 60% before the market opened. These two days can be said to be very exciting.
The collapse of Silicon Valley Bank can be said to be the hot news these days. The last bank collapse was the Washington Mutual Bank during the 2008 subprime mortgage crisis.
The cause of Silicon Valley Bank’s bankruptcy this time can be traced back to the weakening of the epidemic in the second half of 2020.
At that time, a large amount of funds flowed into Silicon Valley Bank. From June 2020 to December 2021, Silicon Valley Bank grew from US$76 billion to more than US$190 billion, an increase of nearly 2 times.
At this time, the Federal Reserve had not yet started to raise interest rates. Silicon Valley Bank did not want to keep its money in the Federal Reserve reserve account because the annual interest rate was only 0.1%, so it bought a large amount of Treasury bonds and mortgage-backed securities (MBS)
This means that he has allocated half of his total assets to MBS.
Since the Fed's interest rate is 0, then buy the safest asset in the world, short-term US Treasury bonds, and you can make a little profit.
However, the cash and cash equivalents on hand of Silicon Valley Bank did not grow significantly. When he aggressively allocated long-term assets, he did not reserve sufficient cash reserves to cope with deposit outflows.
There are two types of fixed income products that banks generally purchase:
1 AFS available for sale
2 Held to Maturity HTM
Therefore, SVB Silicon Valley Bank also uses AFS for most of the $16 billion in U.S. Treasury bonds it holds.
Among the 1 billion MB BS he holds, HTM is mainly used for measurement. Its advantage is that the fluctuation of asset market value will not be reflected in the profit and loss and can be reversed. Its disadvantage is that it is forced to sell AFS HTM and needs to recognize a profit and loss in the current period.
At this time, at the end of 21, US inflation began to soar sharply, causing US debt to plummet in 2022, the largest drop in more than 200 years.
Silicon Valley Bank suffered heavy losses and ordinary people began to withdraw their deposits.
The rate hike has also begun
It seems wise to increase holdings of MBS and US Treasuries when interest rates are low, but the risks are also huge when interest rates are high.
SVB’s previous investments were not made at a time when interest rates were not raised.
So in 2022, his savings were lost in large amounts.
He must suffer some losses in order to deal with user deposits.
So he finally couldn't hold on and this crash happened. The Fed's interest rate hike was also the most direct reason, which directly caused the bank to go bankrupt.
The occurrence of this incident may also be a breakthrough to prevent the Fed from raising interest rates. Its subsequent interest rate hike decisions will also be more cautious.
In the past two days, Bitcoin and ETH have experienced spring, summer, autumn and winter.
On this quiet night of March 10, the bulls were still sleeping soundly. The decline reached nearly 1380. I was the night owl who watched him pull it at four in the morning. I thought to myself, this thing is really a bullshit. It pulls it for you secretly every day in the early morning. I can even imagine that the bulls will be shocked when they wake up. What about my position?
At 8 pm on March 10, the number of liquidations reached 380 million
And at this time when everyone is bearish, this thing starts to play tricks on you again
3.13 in the early morning from 1452 to 1549
At 8 am, it was pulled to 1623
No chance for the air force to breathe
There are four big words written on his face: Don't even think about getting out of this mess
The current non-agricultural data does not have a big impact. Let's see tomorrow night.
The CPI data at 8 pm on March 14 is also the key to deciding whether to raise interest rates.
However, it is estimated that the Fed will no longer dare to raise interest rates. Banks have raised their interest rates. There are also reports that the possibility of raising interest rates next week is less than 14 basis points, and the interest rate will be reduced by 50 basis points before the end of the year.
