The beginning of the chain reaction – You probably won’t have missed the information of the weekend. Since Friday, there has been panic on board in the USA after the fall of the Silicon Valley Bank (SVB)the 16e largest US bank. While this last looking for a buyer, and that the government should once again intervene to protect savers, the risk of contagion threatens. Decryption.
When American banks stumble
Since the beginning of this month of March, the traditional American banks have had a sweat on their foreheads and their nerves on edge. In their number of eternal monetary tightrope walkers in this debt market, some are walking on a wire, rocking violently, or even have already fallen. The victims are also banks close to the startup and crypto sector. And this is no coincidence. Because these companies are the first to suffer theimpact of the sharp rise in US interest rates. Failing to find financing, they are therefore the first to turn to their banks to recover their cash. And that’s where it gets stuck, because the principle of a bank is not to have any, precisely, cash. THE reserve evidence requested from crypto exchanges, banks have been doing very well for decades.
Still, the first to fall into the abyss is neither more nor less than a victim, admittedly a little latecomer, of the FTX disaster, silvergate bank. And now, since March 10, it’s the Silicon Valley Bank who falls. Unable to assume the consequent and concerted withdrawals of its panic-stricken clients, we are literally witnessing to a bank run. To the point of bankrupting the bank. The problem? Many startups in Tech, but also in crypto had funds in the bank.
One of the first concerned? Circle is his USDC stablecoin. We learned last week that, according to Jérémy Allaire, its CEO, Circle had about $3 billion trapped in the SVB. Enough to panic the market and trigger the temporary de-indexation of the USDC against the dollar. Indeed, the latter fell last Friday to $0.9 to quickly regain its 1:1 equivalence over the weekend.
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The beginning of the contagion?
However, the funds of many companies are now at risk. Circle therefore seems to have passed the bottom of the wave. But Brad Garlinghouse, the CEO of Ripplehas, too, announced to be exposed at Silicon Valley Bank. And now we know that the SVB had one more victim: BlockFi, already bankrupt. What to complete the company already in bad shape?
According to the company’s bankruptcy report, it had of funds within the SVB. $227 million to be exact. These were allocated to a pooled money market fund (MMMF or money market mutual fund).
However, the US government is unlikely to allow its banking sector to collapse. He should therefore bring out his famous ticket machine in the event of a too critical situation. Janet YellenSecretary of the United States Treasury, is on deck and a speech by Joe Biden is expected during the day. The following see you next episode.
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