Silicon Valley Bank, SVB, a U.S. bank specializing in venture capital financing with an appetite for crypto, is in the throes of a banking panic.
Indeed, the sudden rout of Silicon Valley Bank (SVB), which was shut down on Friday by U.S. authorities, has disrupted the entire banking sector in the stock market, with markets wondering about the consequences of what represents not only the largest bank failure in the U.S. since the 2008 financial crisis, but also the second-largest failure of a retail bank across the Atlantic.
The U.S. Federal Reserve’s (Fed) aggressive rate hike is partly to blame for its woes, analysts say.
The bank founded in Silicon Valley in 1983 announced Wednesday a surprise capital increase to deal with a liquidity risk, strongly impacting the securities of the largest U.S. banks on the stock markets, and probably also the crypto values already very heckled this month. Bitcoin has lost more than 10% of its value in the space of a week.
In other words, SVB specializes in financing tech companies. For several months, this sector has been experiencing difficulties that reduce the ability of its players to raise funds, especially in an environment marked by a tightening of monetary policies of central banks.
It is in this context that SVB’s clients have massively requested to get their money back. The problem was that the bank was unable to meet the high demand for withdrawals.
To avoid facing a liquidity crisis, it announced on Wednesday evening that it would seek to raise capital quickly, without succeeding, and sell for $21 billion of financial securities, but losing $1.8 billion in the process.
SVB is another crypto-friendly bank!
Like the now defunct Silvergate Bank, Silicon Valley Bank is a so-called crypto-friendly institution and therefore has companies in this industry as customers.
Silicon Valley Bank, another crypto-friendly bank, is under pressure. The bank is generally considered one of the default fallback options for industry players affected by the Silvergate collapse,” commented Ilan Solot, co-crypto director at Marex.
Several large crypto VCs, including Mechanism Capital, have advised projects in their portfolio to pull their funds from the bank. According to Bloomberg, Peter Thiel’s investment firm Founders Fund has also recommended that its partner startups move away from SVB.
Yesterday, Greg Becker, the bank’s boss, asked his clients to “stay calm“, according to a person close to the case quoted by the American news agency.