Cryptocurrency

[Smokin Joe]

The irony.
The current bout of finanical instability is caused purely by the Fed.

Print loads of dollars in QE from 2019-21, banks invested a lot of these funds in Treasuries etc. Indeed due to liquidity regulations they are mandated to hold a minimun percentage of HQLA (High Quality Liquid Assets) in order to reduce their riskiness.

But because of all the financial easing inflation started to run away, so then the Fed rapidly raised rates as well as remove approx $1tn from the system by way of QT.
Due to the rapid rise in interest rates the market value of the Treasuries fall.  The rising interest rates also cause businesses to struggle (this is one of the prescriptions for reducing inflation) which means there is less cash deposited at banks.  When account holders ask to withdraw their cash and the banks don't have sufficient cash on hand (due to fractional reserve banking) then they need to sell their assets to raise the cash.  But their assets are now worth less due to higher interest rates.  This means the banks lose money so then try to raise fresh equity, but this then spooks the market and a bank run starts.

Every single aspect of that is caused by the Fed / Central Bank actions, not crypto.  How did they not realise that increasing rates from 0% to 5% wouldn't result in these issues with huge chunks of banks' assets having to be marked to market?

Given the way the Fed has used this to close down Signature Bank (even though it supposedly wasn't in that much trouble) as it and Silvergate were the two most crypto friendly banks it is hard not to wonder if we are approaching the 3rd stage of the below Mahatma Gandi quote:

"First they ignore you, then they laugh at you, then they fight you, then you win"

How does the Fed / Central Bank get the trains back on the track? The QE started in 2019 due to worsening conditions in the Repo market, the printing resulted in rising asset prices and really high inflation. They raise rates for 12 months and reduce their balance sheet for 7 or 8 months and we now end up in this crisis.  I'm sure they'll go back to easing again, indeed it could perhaps already be said that easy has started again yesterday with banks able to post their under water collateral with the Fed to borrow the full nominal value.  What happens when inflation goes crazy again?
I've said for a couple of years here that I don't know if Bitcoin is the answer, but the current system seems to be running on fumes and I'm happy to take a punt on Bitcoin given the evidence before me.

[Mike Tyson]

The irony.
The current bout of finanical instability is caused purely by the Fed.

Print loads of dollars in QE from 2019-21, banks invested a lot of these funds in Treasuries etc. Indeed due to liquidity regulations they are mandated to hold a minimun percentage of HQLA (High Quality Liquid Assets) in order to reduce their riskiness.

But because of all the financial easing inflation started to run away, so then the Fed rapidly raised rates as well as remove approx $1tn from the system by way of QT.
Due to the rapid rise in interest rates the market value of the Treasuries fall.  The rising interest rates also cause businesses to struggle (this is one of the prescriptions for reducing inflation) which means there is less cash deposited at banks.  When account holders ask to withdraw their cash and the banks don't have sufficient cash on hand (due to fractional reserve banking) then they need to sell their assets to raise the cash.  But their assets are now worth less due to higher interest rates.  This means the banks lose money so then try to raise fresh equity, but this then spooks the market and a bank run starts.

Every single aspect of that is caused by the Fed / Central Bank actions, not crypto.  How did they not realise that increasing rates from 0% to 5% wouldn't result in these issues with huge chunks of banks' assets having to be marked to market?

Given the way the Fed has used this to close down Signature Bank (even though it supposedly wasn't in that much trouble) as it and Silvergate were the two most crypto friendly banks it is hard not to wonder if we are approaching the 3rd stage of the below Mahatma Gandi quote:

"First they ignore you, then they laugh at you, then they fight you, then you win"

How does the Fed / Central Bank get the trains back on the track? The QE started in 2019 due to worsening conditions in the Repo market, the printing resulted in rising asset prices and really high inflation. They raise rates for 12 months and reduce their balance sheet for 7 or 8 months and we now end up in this crisis.  I'm sure they'll go back to easing again, indeed it could perhaps already be said that easy has started again yesterday with banks able to post their under water collateral with the Fed to borrow the full nominal value.  What happens when inflation goes crazy again?
I've said for a couple of years here that I don't know if Bitcoin is the answer, but the current system seems to be running on fumes and I'm happy to take a punt on Bitcoin given the evidence before me.

Nothing to do with Thiel and the Venture Capitalist crew?

[Smokin Joe]

Nothing to do with Thiel and the Venture Capitalist crew?

How does what a "VC crew" did impact on the ability of a Bank to be able to honour their deposits when they are requested?

[Mike Tyson]

Nothing to do with Thiel and the Venture Capitalist crew?

How does what a "VC crew" did impact on the ability of a Bank to be able to honour their deposits when they are requested?

By telling everyone to withdraw their deposits and causing a run on the bank?

[whitey]

They used long term instruments to fund (what became) short term liabilities

They didn't hedge their interest rate risk

https://www.wsj.com/livecoverage/stock-market-news-today-03-13-2023/card/silicon-valley-bank-dropped-a-hedge-against-rising-rates-in-2022-6MiD9ZLVY9CF8zbIM7ze

"One point that surely didn't help: The bank reported virtually no interest rate hedges on its massive bond portfolio at the end of 2022. It terminated or let expire rate hedges on more than $14 billion of securities throughout the year, the company said in its year-end financial report.

Interest rate hedges are often in the form of something called swaps, a financial instrument that effectively turns an investor's fixed-rate loans or bonds into floating rate by paying a third-party. These can be important for banks like SVB because so many of their investments are tied up in fixed-income bonds like mortgages or Treasurys. When rates go up, fixed-income bonds fall in value, as happened with SVB.

Previously, SVB had boasted about its hedging"

It's mind boggling how negligent and irresponsible they were

[screenexile]

Glad to see Trump still getting the credit he deserves...

https://www.forbes.com/sites/mayrarodriguezvalladares/2023/03/12/how-trumps-deregulation-sowed-the-seeds-for-silicon-valley-banks-demise/?sh=53ad9dfd3432

[whitey]

Glad to see Trump still getting the credit he deserves...

https://www.forbes.com/sites/mayrarodriguezvalladares/2023/03/12/how-trumps-deregulation-sowed-the-seeds-for-silicon-valley-banks-demise/?sh=53ad9dfd3432

And Barney Frank too

https://www.wsj.com/articles/barney-frank-pushed-to-ease-financial-regulations-after-joining-signature-bank-board-e5c8819c?mod=mhpO

The 2010 Dodd-Frank legislation set tougher regulatory safeguards on banks with more than $50 billion in assets. After leaving office and joining Signature's board, Mr. Frank, a Massachusetts Democrat, publicly advocated for easing those new standards for smaller banks.P

[Mike Tyson]

They used long term instruments to fund (what became) short term liabilities

They didn't hedge their interest rate risk

https://www.wsj.com/livecoverage/stock-market-news-today-03-13-2023/card/silicon-valley-bank-dropped-a-hedge-against-rising-rates-in-2022-6MiD9ZLVY9CF8zbIM7ze

"One point that surely didn't help: The bank reported virtually no interest rate hedges on its massive bond portfolio at the end of 2022. It terminated or let expire rate hedges on more than $14 billion of securities throughout the year, the company said in its year-end financial report.

Interest rate hedges are often in the form of something called swaps, a financial instrument that effectively turns an investor's fixed-rate loans or bonds into floating rate by paying a third-party. These can be important for banks like SVB because so many of their investments are tied up in fixed-income bonds like mortgages or Treasurys. When rates go up, fixed-income bonds fall in value, as happened with SVB.

Previously, SVB had boasted about its hedging"

It's mind boggling how negligent and irresponsible they were

Yea seems they were asleep at the wheel. No Chief Risk Officer since April 2022 and no explanation for why wouldn't exactly fill you with confidence about their Risk Management practices...

[smelmoth]

Glad to see Trump still getting the credit he deserves...

https://www.forbes.com/sites/mayrarodriguezvalladares/2023/03/12/how-trumps-deregulation-sowed-the-seeds-for-silicon-valley-banks-demise/?sh=53ad9dfd3432

And Barney Frank too

https://www.wsj.com/articles/barney-frank-pushed-to-ease-financial-regulations-after-joining-signature-bank-board-e5c8819c?mod=mhpO

The 2010 Dodd-Frank legislation set tougher regulatory safeguards on banks with more than $50 billion in assets. After leaving office and joining Signature's board, Mr. Frank, a Massachusetts Democrat, publicly advocated for easing those new standards for smaller banks.P

A basic root cause analysis would tell you that the changes Trump actually made had more of a negative impact than the ones Frank argued for but didn't get.

Nobody could argue this is good for Trump.

[whitey]

Glad to see Trump still getting the credit he deserves...

https://www.forbes.com/sites/mayrarodriguezvalladares/2023/03/12/how-trumps-deregulation-sowed-the-seeds-for-silicon-valley-banks-demise/?sh=53ad9dfd3432

And Barney Frank too

https://www.wsj.com/articles/barney-frank-pushed-to-ease-financial-regulations-after-joining-signature-bank-board-e5c8819c?mod=mhpO

The 2010 Dodd-Frank legislation set tougher regulatory safeguards on banks with more than $50 billion in assets. After leaving office and joining Signature's board, Mr. Frank, a Massachusetts Democrat, publicly advocated for easing those new standards for smaller banks.P

A basic root cause analysis would tell you that the changes Trump actually made had more of a negative impact than the ones Frank argued for but didn't get.

Nobody could argue this is good for Trump.

m

Believe what you want

"Mr. Frank, who has earned more than $2.4 million in compensation from Signature Bank since 2015, rejected the idea that the regulatory change abetted Signature's collapse.

"Nobody has shown me any evidence of systemic or other kinds of fraud that would have been prevented" without the 2018 rollback, Mr. Frank said.

Lifting the threshold, Mr. Frank said, was a good change that "saved smaller banks a lot of paperwork." Mr. Frank said that as early as 2013 he began talking publicly about the need to change it, predating his employment with Signature Bank"

[seafoid]

Bloomberg
A One-Off?
There is an argument that SVB was a unique situation with little implication for the rest of the banking system (and Signature Bank, heavily exposed to crypto, doesn't really affect the case). A look at its share performance since the beginning of the pandemic makes it clear that it was generating classic speculative excitement, which is never a good sign in a bank. The fall in its stock price over the last year compared to the financial sector as a whole shows that the market perceived the bank to be in some kind of trouble:

[bennydorano]

BBC News - Is the US trying to kill crypto?

https://www.bbc.co.uk/news/business-65861096

[Capt Pat]

BBC News - Is the US trying to kill crypto?

https://www.bbc.co.uk/news/business-65861096

About time but probably too late. What about all the people who got ripped off?

[Smokin Joe]

BBC News - Is the US trying to kill crypto?

https://www.bbc.co.uk/news/business-65861096

Or were they trying to kill the companies who started / currently lead in Crypto to facilitate the traditional finance market moving in?
https://www.reuters.com/business/finance/blackrock-close-filing-bitcoin-etf-coindesk-2023-06-15/

[bennydorano]

Good bounce today, something going on? I've been minded to cash out lately, got the trigger finger ready