Silicon Valley Bank: Had Nothing To Do With Cryptocurrency
Warning: This taskmaster account is a fake and not me. Unless you see an older account with the user name, it is an imposter.
The media loves to tie anything negative to cryptocurrency. We see FUD repeatedly tossed around. This is the same rhetoric that we hear regularly, meant to cast the industry in a negative light.
In the end, even though Circle had some exposure, this was not a cryptocurrency related event. The decisions of that company are exclusive to them.
We are often told how it is crypto's fault when something happens. Take the FTX situation. We all know what Sam Bankman Fried is. However, when people like Mike Novogratz had hundreds of millions tied up with that exchange, what does that tell you?
Isn't he (or his firm) suppose to access the risk and decide what is taking place? Who was running the money at that fund that was keeping an eye on things? While FTX and SBF do not get a pass, neither should the money managers who were too foolish (or greedy) enough to engage with an entity like that.
Silicon Valley Bank
So what is the problem with Silicon Valley Bank?
In short, this is a real estate story. It is also one of the issues with smaller banks. They tend to not know what they are doing and will end up losing people a lot of money.
Silicon Valley is a hot bed for technology. Everyone is aware of this. It is also a mecca for insane real estate prices. The market there is absolutely crazy. Of course, recent events in that area, i.e. layoffs, have led to a reversal in conditions. This does not bode well for a bank like SVB.
The Fed is raising interest rates. Here we have another problem not only for the real estate market but also a bank like this. Since most of the loans in that area were jumbo loans, the bank had them on their balance sheet. This forced a tightening of conditions as defaults ticked up as well as put the bank in a liquidity crunch.
Of course, other measures such as tax increases and other policies had an impact in different areas. This is all leading to a bad situation for these small banks. That said, it is region specific since the real estate market is being affected differently based upon the area.
Ultimately, Silicon Valley Bank believed the party would continue forever. It was, after all, the tech center of the world. There is no way we would ever see a pullback in demand there. They obviously do not understand how layoffs work.
Business Cycle
Cryptocurrency is not going to change the business cycle. We often discuss changing the financial system. While banks are a problem, eliminating them with FinTech, crypto or not, is not going to solve things.
The reality of the situation is the mass layoffs in Silicon Valley were due to the fact that the tech executives were no more adept at managing the business cycle than the bankers. They expanded their operations on the way up, believing things would keep going. When it became evident this was not a lull, they started to reverse course. Unfortunately, the bloodshed already started.
We are dealing with an entity that is undefeated for centuries. As we try to combat the business cycle, we only get run over by it. Central banks believe they can fix it; they cannot. Goldbug believe it is due to the wrong money and commodity based currency is the answer; it is not. Bitcoin Maxis feel Bitcoin can solve it all: it won't.
And most of cryptocurrency is resolute that if the bankers just went away, we would cure it.
This is not the case either.
The business cycle is grounded in basic human psychology. We all get caught up in the good times, often forgetting how painful the last downturn was. Of course, the flip side is the doomers who always preach this is the big one, not realizing things do eventually turn.
Cryptocurrency will not shield us from this reality. If anything, we have shown the propensity to fall right in line. The boom-bust cycles of cryptocurrency are rather powerful. We are no different than anyone else.
Back To The Basics
It always comes back to the basics. Risk management, cash position, solid business building, and an awareness of where we stand are vital. It is important to know the music always stops whether it is Girls Just Wanna Have Fun or Taps that is playing.
Contrary to what the media is portraying, the issues of the world are not caused by cryptocurrency. At this moment, we really are a flea on the back of a dog. With a market cap of around a trillion dollars, we don't have enough might to sink a rowboat.
Keep this in mind when the media wants to tie things to cryptocurrency. There is a good chance crypto was just a bystander in it all.
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Why traders more focused on negative things instead of all the positive happening on daily basis in cryptocurrency space
Traders focus upon the short term. They arent concerned with the long term outlook. Positive or negative matters none, it is all about volatility.
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Honestly I love this because all those people calling crypto a scam now got a taste of how it's the same in the Fiat world. At least with crypto your in more control and that's the biggest thing people constantly miss about why crypto is better.
Not sure this is a lesson in the fiat world. And we are technically in it also.
That said, it is the same story. Small banks in Florida and Texas are doing well right now because real estate is holding up. If it turns there, these banks will be like my buddy's, going under.
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I had seen an interview somewhere where they claimed that SVB also made a mistake in tying up billions in cash in bonds before the Fed raised rates. So, if they wanted to liquidate, they'd have to take a haircut to match the new yield. It still comes down to the liquidity problem you mentioned.
I've met some financial types, socially. After they get their degree, they generally forget everything they learned. They only know enough to operate the products their company offers. They're sales people more than finance experts.
Yes that is how you get caught if you need liquidity.
If holding the bonds under maturity, it doesnt matter.
That is why SVB moved its bonds to the book side and not trading. The value dropped so they didnt have the same weight in the market. Hence, they got caught in a liquidity crisis.
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I disagree, because indirectly it has a lot to do with cryptos, now we know USDC issuer was a client of SVB, so don't be surprised if USDC goes to zero, very soon.
And who knows how many coin issuers were clients top of this big one, news just coming out.
It is a really good TV show, advertisment from last month for SVB buy, just before the failure... (starts at 0:29 in the video) look the other stocks on the board: Tesla, Carnival, Norwegian Cruise Line etc. could not stand without laughing for minutes... I don't believe Americans still eat this kind of sh*t, or generally anybody...
https://vigilante.tv/w/xmfYCWi78bEC6kpkAeTL36
Wonder who the hell is Jim Kramer, and how much he got for it... :) :) :) and how many families will be homeless tomorrow thanks for him and msm...
And FYI, this Silicon Valley Bank is (was) a top20 in the USA, so definitely not a small or smaller. It was actually bigger in the US than Deutsche, Santander, Barclays, BNP, just few from the worldwide known ones...
https://en.wikipedia.org/wiki/List_of_largest_banks_in_the_United_States
They try to keep the people asleep, downspeak the size, relevance, importance of it, and what it's signaling to the very near future... nothing new under the sun.
I think the fact that it's basic human psychology means that we should be aware and be ready for it but I guess we're also forgetful beings so it seems new every time it happens despite a similar thing happening before.
You're right it's about the crowd psychology, and we need to evolve faster, but in a more coherent manner. Blockchains must be used to solve real world issues, to build that basic trust, and not soley based on speculation alone. That trust must not be built on pipe dreams, but grounded in the real world, and must know how to keep it going wether it's bulls or bears...
Good day.
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The media will always find opportunities to give cryptocurrency negative publicity, the best is to ignore them.
Crazy that you are being impersonated, some just want to rip where they never sow.
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When media giants take up an angle, they go with it even if there's evidence of something. It's a way to discourage the use of cryptocurrency for the general public.
Auction Tonight, Federal Deposit Insurance Corporation - good luck to you :)
I read somewhere SVB supposedly behaved by not investing customer funds using risky financial instruments, instead all low-risk investments. Whatever that means.
A lot of SVB's clients were also startup companies.
A notoriously fickle lot to be sure.
They demanded their money back in mass and SVB went under.
Too bad so sad.
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I agree that the bank itself isn't completely related to crypto even if there are some crypto related companies there. After all, there will always be some crypto related stuff in the technology field. The biggest issue I see with them is that they didn't diversity their loans and it's all in the same industry. Those companies got crushed in the recession.
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It is a lot easier to add crypto to the mix. Indeed it is us that need to behave and understand crypto is a pion that can help in the trustless business.
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One thing I liked about this news is that finally, banks are exposed. From what I feel, I feel like most of the finance sectors are trying to put all the blame to crypto.
~$3B of USDC reserves are in SVB and since we mixed a lot of USDC with DeFi coins it does have a bit to do with crypto.
It's not much but just enough to cause that weekend panic mode which is now completely mitigated it seems.
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Chris Whalen, an investment banker who used to work for the Fed, has put the blame squarely on the shoulders of Powell's rate rises which have put alot of strain on banks who bought US government paper when bond prices were high and yields were low. Now when rates are much higher the price of the bonds they bought when rates were at zero has gone down alot meaning those banks have large unrealized losses.
No one in the Fed/US treasury seemed to realize that rate rises are not good for the banks.
Do you not think the Fed may pause its rate rises to take pressure off the banking system?
The other issue of course is how the Fed/Treasury have given yet another bailout to the 1% who will be reimbursed in full instead of taking any losses on this bank going under.
The simple guide to understanding anti-capitalism/anti-crypto...
Left Tribe: People got rich and sought some form of freedom with their resources.
Right Tribe: The Wrong People got rich and sought some of freedom with their resources.
I was an early investor in Galaxy Digital stock back in 2021. I made some money off it, but I was very angry with how ZERO RISK ASSESSMENTS WERE MADE regarding the LUNA/UST investment, that Novogratz cashed out of at the top (after he hyped and pumped it for months), THEN the same shit happened with FTX, ZERO RISK ASSESSMENT. NO HEDGES. When FTX collapsed, Galaxy Digital's stock plummeted along with it. It has not recovered since. Novo will never be held accountable for stock promotion or anything else, as he is a former Goldman banker, and they're practically untouchable.
The SVB debacle is no different, imo. No Risk assessment, no hedges, no protections from downside due to interest rate increase risk, nothing. Just a bunch of VCs and tech startup speculators that got burned - and then ultimately got bailed out and bought.
It appears Goldman Sachs bought SVB's portfolio and sold it for a ~$1.7B loss
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