The collapse of Silicon Valley Bank was the big news in the global economy last week, as it was the second biggest bank collapse in US history. SVB had $209 billion in assets at its disposal. Only Washington Mutual’s collapse was bigger, with assets valued at $307 billion at the time of the crash.

On the whole, SVB was a victim of the so-called bank panic, i.e. massive withdrawals by customers. It was this customer behaviour that exposed the problems in the financial institution and its risk management.

We have described the details of what is happening in a separate article. We recommend that you read it to get a better understanding of the situation.

What happened to Silicon Valley Bank

In an interview with Decrypt reporters, Fresco Capital partner Stephen Forte revealed a few details from the bank’s history.

SVB, being a high level bank, invested in US Treasury bonds for a long and short term.


That is, the banking institution invested clients' money in various financial instruments, which in principle is normal for banks. However, in this case, the management of SVB was negligent in its risk management. Still, the bank employees listened to the Fed, which predicted a slight change in the key rate in 2023, and actively invested in government bonds.

However, rates eventually began to rise, which made the yields of the latter no longer seem so attractive and led to a loss of the bank's funds. In addition, the bank kept only small part of customers' money as reserves, so the bank could not cope with pressure at the influx of people wanting to withdraw their funds.


Under normal circumstances there is no problem here – investing in government bonds is one of the safest strategies in terms of risk. However, SVB was already having capital problems and the bond investments were rumoured to have made losses. These rumours were precisely the reason for the massive withdrawal of funds from the bank. Here is the relevant quote.

The spreading of information on Twitter led to a massive withdrawal of funds and then [the bank] had to record a minus on bonds, which widened the scope of the tragedy.

After rumours emerged that the bank was looking for a buyer, SVB customers withdrew $42 billion from their accounts in one 24-hour period last week alone. On Friday morning, Nasdaq suspended trading in the bank’s shares under the ticker SIVB, and California state banking regulators ordered SVB to cease operations.

The federal Deposit Insurance Corporation, SVB’s appointed receiver, said in a press release that insured depositors with less than $250,000 in SVB accounts will have “full access” to their funds no later than Monday, March 13. As noted initially, the rest would have to wait.

And there are many such victims – SVB’s total assets at the end of 2022 were around $209 billion. Many cryptocurrency companies have also stored their capital in this cash mass.

In the end, the Silicon Valley Bank situation tentatively ended better than anticipated. The Fed stepped in, it was revealed tonight. In general, the representatives of the US banking system reported about the additional funding for the depository institutions, and announced their readiness to use all available instruments to support households and businesses. Thanks to this SVB clients will get access to their funds in full today, which means there will not be a collapse due to lack of money users beforehand.

It is also worth noting that HSBC UK Bank plc will buy the UK arm of Silicon Valley Bank UK Limited for £1. In addition, given what is happening in the economy, at the next Federal Open Market Committee (FOMC) meeting on March 22, 2023, the key rate may be left unchanged, instead of increasing it by 50 basis points as previously planned.

SVB is not the first bank to collapse. Last week, a similar incident occurred with another bank, Silvergate. It was closely linked to the crypto industry, serving many large companies in the field. On Tuesday, White House spokeswoman Carine Jean-Pierre said during a press briefing that Silvergate was “another cryptocurrency company facing significant problems”.

It is important to note that Silvergate was primarily a bank that complied with their local regulations. So blaming digital assets, blockchain platforms and the volatility of crypto in general is a dubious idea.

That is, even before the SVB collapse, there was a perception that banks associated in any way with crypto projects have more risk in them than their competitors, who prefer not to get involved with crypto. This claim was refuted in an interview by Keyrock CEO Kevin De Patul. Here’s his quote.

They [banks] may have a few startups that are involved in cryptocurrencies to some extent as clients, but they are not a big part of the infrastructure of the crypto market. So for me it’s a completely different story.

Market maker and liquidity provider Keyrock has been forced to make some operational changes to its operations following the closure of the Silvergate Exchange Network (SEN) payment network. As a reminder, SEN was one of the few ways for cryptocurrencies to instantly make large transactions with other institutions.

The SVB incident has negatively impacted the crypto market primarily through Circle, which is the issuer of one of the most popular USD Coin stackablecoins. On Saturday, it was revealed that Circle was holding 8 per cent of its own reserves to shore up USDC in SVB.

On the back of this news, USDC’s value deviated severely from the US dollar last week. Today, however, USDC is valued at 98.5 cents, which is almost in line with the normal steiblocoin exchange rate.

As Circle representatives noted over the weekend, the company’s own resources allow it to cover its asset shortfall, so USDC holders should have no problems. In addition, they have now revealed the transfer of $3.3 billion held at Silicon Valley Bank to BNY Mellon.


We think that the current situation clearly shows how "safe" the banks are. They do not act with their clients' money in a transparent way. And if a financial institution behaves irresponsibly and doesn't hedge its own positions, as Silicon Valley Bank's management did, users' money can evaporate.

This, however, cannot be done in the decentralised finance industry, which is based on immutable public smart contracts and transparent blockchain. So here we can assume that what is happening with SVB will be a reason for more people to connect with cryptocurrencies. In addition, many digital assets have at least fixed limited inflation, which in the current economic climate will be another benefit to the reputation of the coins.


In any case, stay tuned for other important news in our Millionaire Crypto Chat. It’s especially important to keep your finger on the pulse right now.