Tales from the Crypt-o: RIP to Silicon Valley & Signature Bank

On Sunday, March 12th Signature Bank was shut down marking the third-largest bank failure in U.S. history. Signature was a commercial bank with branches in New York, Connecticut, California, Nevada and North Carolina, and had “nine national business lines including commercial real estate and digital asset banking”. The closing marked the third bank collapse in under a week following Silvergate’s liquidation on Wednesday and Silicon Valley Bank’s shutdown on Friday. The regulators closed Silicon Valley Bank on Friday and seized its deposits in the largest U.S. banking failure since the 2008 financial crisis — and the second-largest ever. This comes just days after the tech-focused institution reported it was struggling, triggering a run on the bank’s deposits.

According to sources,

“Like Silvergate, Signature Bank was a significant lender to the cryptocurrency industry, with almost a quarter of the bank's deposits coming from the crypto sector. The bank experienced large outflows of deposits in the aftermath of the collapse of FTX and other high-profile crypto exchanges, with deposits sinking 17% in the fourth quarter of 2022 compared to a year prior. The bank's troubles were compounded further by rising interest rates due to the Fed's rate hikes.”

The President took to Twitter on Monday morning to reassure depositors they will be able to access their money when they need – hopefully alleviating concern of those that leveraged Signature Bank for their investments.

Does this validate the instability of crypto?

In the long run, the shutdown of the 3 crypto heavy banks could present problems for bitcoin, the world’s largest cryptocurrency (value of $422 billion.) “The Silvergate Exchange Network (SEN) and Signature’s Signet were real-time payment platforms that crypto customers considered core offerings. Both allowed commercial clients to make payments 24 hours a day, seven days a week, through their respective instant settlement services.” With these two banks going under it leaves very little options for crypto firms seeking liquidity.

What does that mean for us? Well crypto continues to be a space of great volatility, with great bottoms outs like these banks, does it leave opportunities for new highs in the future. However, the de-banking of crypto is a signal to those looking to still invest that it is a terrain that even the most experienced banks are able to anticipate so investing at such a high risk may or may not be worth it while financial analysts work to make sense of it. Invest wisely.

Sources: Reuters, Ivestopia, CNBC