3 Bank Failures, FED goes Brrrr, Crypto Winter Over

3 Bank Failures, FED goes Brrrr, Crypto Winter Over
Photo by Fabio Ballasina / Unsplash

Silvergate Bank, Silicon Valley Bank and Signature Bank just collapsed in spectacular fashion in March.

On Friday, March 10, the Federal Deposit Insurance Corporation (FDIC) of the United States assumed control of SVB, marking the largest banking collapse in the country since Washington Mutual's failure in 2008. The incident was preceded by a critical 48-hour period wherein the bank suffered a significant loss while liquidating US government bonds in an attempt to secure funds for depositors. Despite efforts to stabilize its finances through the sale of shares, SVB was unable to avert the ensuing panic that ultimately led to its downfall.

On the 12th of March, the FDIC took the decision to close down Signature Bank following a significant influx of customer withdrawals caused by concerns stemming from the collapse of SVB. These two financial institutions had a remarkable degree of uninsured deposits in order to finance their operations, which ultimately led to their downfall.

On the 15th of March, the plummeting shares of Credit Suisse (CS) prompted the Swiss authorities to intervene with a backstop for the nation's second-largest financial institution. This action managed to alleviate the market's immediate concerns, however, the global entity is still facing a precarious situation. Unease among investors and customers is mounting due to the perceived lack of a viable strategy to counteract the long-standing decline of its business.

On the 16th of March, there was an alarming situation at First Republic Bank wherein customers were withdrawing their deposits, leading the bank to near the brink of collapse. In response, an exclusive meeting was held in Washington between the esteemed US Treasury Secretary Janet Yellen and Jamie Dimon, chief executive officer of the largest bank in America. The duo formulated a strategic plan to rescue the First Republic Bank through private sector intervention. Consequently, a consortium of American lenders entered into an agreement to inject substantial sums of cash into the ailing financial institution, thereby averting a financial disaster.

Thus far, direct central bank support has reached an impressive sum of nearly $200 billion. The US Federal Reserve has undertaken the task of guaranteeing all deposits at Silicon Valley Bank and Signature Bank, thereby incurring a liability of $140 billion. Additionally, the Swiss National Bank has offered Credit Suisse a whopping $54 billion in the form of an emergency loan.

In a bid to further alleviate the economic impact of the ongoing pandemic, the Fed has agreed to extend unprecedented amounts of loans to other banks this week. In recent days, banks have borrowed nearly $153 billion from the Fed, far surpassing the previous record of $112 billion set during the 2008 financial crisis.

Further, banks have availed themselves of nearly $12 billion in loans from the Fed's new emergency lending program, established at the beginning of the week with the specific goal of halting further bank closures.

The Fed's total loans to the financial system, which amount to $318 billion

Bank Failures Comparison

With over $300 Billion printed by the FED in the last week, inflation is likely to continue. It is expected that interest rates will rise.

The next Federal Reserve meeting is scheduled to begin on March 21, 2023, and will end with a policy statement on March 22, 2023 at 2 pm Eastern. According to market pricing and many analysts, the Federal Reserve is expected to approve a quarter-percentage-point interest rate increase during this meeting.

Bitcoin hits 9 Month High at $27K and according to Twitter it's the end of Crypto Winter.

Historically Bitcoin performs well when the FED is printing money. We may finally see a decoupling from the stock market as Bitcoin is used to hedge against inflation. Any more bank fails will accelerate Bitcoin adoption. Who wants to keep there money in the bank when they are at risk of losing it all?

This may be the start of a new Bull Run for Bitcoin. Time will tell.