- The Silicon Valley bank is facing huge liquidity problems.
- The bank is considered a giant in the startup space in the United States.
- Notable crypto-friendly venture capital firms do business with Silicon Valley Bank.
The global financial system is going through one of its first cracks as rapid increases in interest rates in the United States expose underlying liquidity problems.
That crack is Silicon Valley Bank, a startup-focused US bank that has huge liquidity issues.
The possible collapse of the Silicon Valley bank poses a huge risk to the cryptocurrency industry, especially to crypto-friendly venture capital (VC) firms.
Silicon Valley Bank Problems
Silicon Valley Bank, one of the 20 largest banks in the United States with about $200 billion in assets under management (AUM), is suffering from a liquidity shock.
The bank, known for its dominance in the US start-up world, announced a $1.75 billion equity offering this week and a $500 million purchase of common stock by private equity firm General Atlantic to shore up its balance sheet.
The market reaction was strongly negative to the news. Shares of Silicon Valley Bank fell 60.41% Thursday and fell another 62% in the pre-market session on Friday, according to the company. data from Yahoo! finance. SIVB is trading at $39.49.
Moreover, some users reported Inability to log in to their Silicon Valley bank accounts.
The potential demise of Silicon Valley Bank could mean serious trouble for the US startup scene, including crypto companies.
What do Silicon Valley bank woes mean for cryptocurrency?
While Silicon Valley Bank’s troubles do not directly affect the cryptocurrency industry, it poses a significant risk to the long-term success of crypto projects.
That’s because Silicon Valley Bank is one of the friendliest banks in the world. For example, the bank provides banking services to crypto-focused venture capital firms Sequoia and Andreessen Horowitz (a16z).
Some cryptocurrency virtual currencies are sounding the alarm about a Silicon Valley bank. According to various reports, Mechanism Capital, Eden Block, Pantera Capital and other venture capital firms have advised their portfolio companies to withdraw money from the troubled bank.
But there are not many options left where the money is transferred. Silicon Valley bank troubles come just one day after… Silvergate closinganother cryptocurrency-friendly bank that was forced to shut down after suffering a bank run following the FTX explosion.
The potential failure of Silicon Valley Bank and the demise of Silvergate make it more difficult for crypto companies and venture capitalists to get into the industry, invest and manage their money.
on the flip side
- The Silicon Valley bank could be bought out by another bank or bailed out by the US government. One proponent of a 2008-style bailout is the investor Bill Ackman.
Why should you bother
Considered the most important startup bank in the US, Silicon Valley Bank, its failure will mean tough times for US startups, including early-stage crypto companies.
Read more about the Silvergate crisis:
KuCoin CEO on Silvergate: ‘Our money is safe’
Read more about the potential Arbitrum Air drop:
Arbitrum Airdrop: Traders Bet Ethereum Layer-2 Token Will Be Launched By March 31st