Erik Weijers, 17 days ago
Both Bitcoin, Ether and traditional bank stocks in the US dropped about 8% overnight. Both the crypto and the traditional financial sector have their issues. Let's list a few recent problems and deal with the negative news head-on, so we can focus on all the good developments later.
Yesterday, the news broke that Silicon Valley Bank (SVB), a regional United States bank, needed to raise capital to prop up its balance sheet. Traders fear that it's not the only regional bank in trouble and bank stocks tumbled with 8% on average. The reason comes down to the fact that regional banks have a lot of unrealized losses in government bonds, which they partly use as collateral. After the sharp interest rates hikes of the past year, their bond portfolio has dropped in value (full explanation by MacroAlf here).
Macro analysts have warned for many months that things would 'break' because of the fast interest rate hikes. The fastest ever tightening financial conditions is drying up liquidity and destabilizes markets. Is this SVB crisis a first sign that the Fed has tightened too much and will have to reverse course soon?
But why did the crypto prices slip with around 8% as well? There are several things going on.
Like we said, we wanted to get the bad news out of the way. There is less money in the system (liquidity), which gets banks in trouble and depresses prices across all markets. Also, the crypto industry in the US faces headwinds, as regulators seize the post FTX-drama opportunity to marginalize the crypto industry.
But in the background, the innovation in the crypto market is advancing at full speed. Bear markets are for building!
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