Why are crypto banks so vulnerable? How will the Bitcoin market develop in the future
Silvergate BankAfter the thunderstorm, Silicon Valley banks also fell into a liquidity crisis. Other than that, what other crypto banks are being dragged down? More and more US financial institutions are narrowing their crypto exposure, so what are the options for crypto institutions? How do big market players view the long-term impact of the crypto banking storm on the crypto market? What factors are still affected by the coin market storm? What are the more essential influencing factors? How will the Bitcoin market develop in the future?
The “Lehman Hour” of crypto banks is here, what are their respective situations
With the thunderstorm of Silvergate and Silicon Valley banks, crypto banks ushered in a real “Lehman moment,” and the crypto market also suffered a serious blow. Judging from current information, crypto banks have been hit differently. Here's a brief summary of this.
Silvergate Bank ceased operations and voluntarily liquidated. Silvergate Bank was most affected by the FTX exchange storm, and it was also the first to thunder. Earlier,Silvergate CapitalCorp. had to sell assets at a loss to repay depositors and lenders, causing Silvergate Bank to fall; finally, on March 10, Silvergate Capital Corporation completely abandoned its struggles and announced that it would cease operations and voluntarily liquidate Silvergate Bank.
Silicon Valley Bank is still being rescued. It has been taken over by the Federal Deposit Insurance Corporation (FDIC). Next week, DINB will maintain the normal operation of Silicon Valley Bank. On March 10, the Bank of Silicon Valley involved in crypto business (Silicon Valley Bank) Encountered a liquidity crisis; subsequently,US Federal Deposit Insurance Corporation(FDIC) announced that Silicon Valley Bank (Silicon Valley Bank) was shut down by the California Department of Financial Protection and Innovation, which designated the Federal Deposit Insurance Corporation (FDIC) as the receiver. To protect depositors, the FDIC created the Santa Clara Deposit Insurance National Bank (DINB), which will maintain normal business hours for Silicon Valley banks. According to reports, Silicon Valley Bank stated in its 2022 annual report that the bank lends and accepts deposits to crypto companies and also invests in these companies, but it has minimal risk exposure to crypto customers.
Signature was dragged down, its stock price plummeted, and it was also in jeopardy. Due to the impact of the Bank of Silicon Valley and the Silvergate incident, Signature Bank's stock price fell 32% on Friday, and trading was suspended for a second day when bank stocks were sold off for the second day in a row. Similar to Silvergate, Signature is also one of the major banks in the cryptocurrency industry. Although Signature has stated that it has little exposure to cryptocurrencies, it still faces significant risks.
Custodia Bank and others were pressured by regulators, and the US Federal Reserve refusedCustodia Bankmembership application. (Note: Custodia Bank is a full reserve bank that provides payment and custody services for cryptocurrency businesses.) It is worth noting that due to a series of events in crypto banking, the US financial sector suffered a panic sell-off, and the four major US banks (J.P. Morgan Street, Citigroup, Wells Fargo, and Bank of America) evaporated a total of $52.4 billion in market capitalization within March 10. According to people familiar with the matter, J.P. Morgan Chase is ending a relationship withGeminiBusiness partnership; however, Gemini responded to the incident on Twitter, saying that the banking partnership between Gemini and J.P. Morgan Chase was not affected. Also,CoinbaseA spokesperson confirmed that the exchange's banking relationship with J.P. Morgan still exists.
What are the choices of crypto institutions, and how does Big V view crypto banking thunderstorms
After the Silvergate and Silicon Valley Bank thunderstorms, most crypto banks seem to have become conservative. So, for crypto institutions with deposit requirements, what are their options? How do big market players view the impact of the crypto banking storm?
Currently,Signature BankIt has become a major alternative to Silvergate because it offers a similar payment network, Signet, but it doesn't have much interest in more crypto businesses. Last December, the company said it wanted to cut crypto-related deposits to less than 20% of the total deposit volume, with the ultimate goal of cutting them below 15%. The bank's crypto-related deposits fell by $7.4 billion in Q2 last year — around $180 billion, or one-fifth of its total deposits.
Customers BankA good choice for crypto companies, the bank signed up with a lot of big crypto clients in early 2021 and offered something similar to SilvThe ergate network's payment system, and according to people familiar with the matter, the company has no plans to exit the crypto industry. Additionally, Customers Bank hired several Silvergate employees in January.
Cross River BankIt is a bank that has established a foothold among crypto companies in recent years, and Coinbase is one of its customers. A Cross River spokesperson previously stated: Cryptocurrency transaction processing and partnerships are still part of our product diversity, and we allocate our resources based on compliance, market conditions, and customer needs.
MercuryThrough partnerships with Choice Financial Group and Evolve Bank &Trust, it provides services such as checking and savings accounts, wire transfers, etc. A Mercury spokesperson told The Information that the company supports all startups, including those in the crypto industry, but will not partner with trading platforms or BTC ATM providers.
As the crypto banking storm continues to ferment, it appears that US crypto banks as a whole are shrinking their crypto exposure. So, can institutions outside of the US fill the gaps left by Silvergate Bank and the like? Headquartered in SwitzerlandSygnumBank Chief Client Officer Martin Burgherr said in an interview that after Silvergate Capital Corporation said it would stop operating and voluntarily liquidate Silvergate Bank, Sygnum's customer inquiries increased, especially from hedge funds, and they now seem to need to diversify bank partners based on what happened. However, the bank may not be able to fully fill the gap left by Silvergate because we do not provide services to US customers, simply because US regulatory uncertainty is quite high. That's why we'll have to wait for the time being until we see more clarity on crypto regulation, which is not within our risk appetite.
What do the big players in the market think about the crypto banking storm?J.P. Morgan Street(JPMorgan) said in a research report on Thursday that the collapse of the crypto bank Silvergate and the closure of the Silvergate Exchange Network (SEN) posed challenges to the crypto industry. Silvergate has been the gateway to more than 1000” institutional crypto market participants (including major crypto exchanges, mining companies, stablecoin issuers, market makers, and digital asset fund managers), and these stakeholders have been using its network to transfer fiat between their Silvergate accounts and the accounts of other Silvergate customers. Given the current context, and after the collapse of FTX, traditional banks are generally unwilling to cooperate with cryptocurrency companies and face tremendous regulatory pressure, replacing SEN among cryptocurrency market participants in handling dollar deposits and withdrawals will be challenging. Institutional crypto investors in the US, particularly smaller and less mature market players, don't have many options, and they're likely to seek banking services in Europe or elsewhere.
Why are crypto banks so vulnerable, and what factors are still affected by the sharp decline in the coin market
According to this article, crypto banks connect traditional finance and the crypto market. Under the dual influence of the Federal Reserve's interest rate hike and crypto market deleveraging, their vulnerability is most prominent, and therefore the first thunderstorm. Simply put, during the bull market, crypto banks' customer deposits from the crypto industry increased dramatically, and loans were too slow and troublesome, forcing companies to “buy assets”; however, in 2022, the Federal Reserve entered a crazy interest rate hike model, and interest rates rose rapidly, leading to a drop in bond prices. Coupled with the thunderstorm of large crypto institutions, savers made crazy withdrawals, causing crypto banks to run out of money. To cope with withdrawals, crypto banks were forced to sell bonds at a loss, causing huge actual losses. Recently, hawkish signals from the Federal Reserve have intensified, expectations of aggressive interest rate hikes have risen, and Silvergate and Silicon Valley Bank are ultimately unable to go back to liquidation. For debt analysis of Silvergate and Silicon Valley Bank, see “The Most Famous Bank in Silicon Valley Has Collapsed, and Butterflies in the Coin Industry Have Finally Triggered a Storm in the US Banking Industry?” , “Is Rayman always repeated? Articles such as “Exploring the Beginning and End of the Silicon Valley Bank Liquidity Crisis”.
In addition to the reasons mentioned above, what other reasons are worth paying attention to in this round of crypto market collapse?
The SEC's regulatory stance is tough, and strong regulation may be imminent, adding to the fear in the market. Chairman of the US Securities and Exchange CommissionGary GenslerAs Chairman of the US Securities and Exchange Commission, I have one goal when it comes to the crypto market: to ensure that investors and the market have all the protections they can get in any other securities market, according to the article. In its view, first, intermediaries and tokens should properly comply on their own. Gary Gensler also said: We already know that most cryptocurrencies are endorsed by entrepreneurs, and other characteristics make them likely to be classified as securities. We already know how lending and pledging platforms are subject to securities laws. We've made it clear that platforms that list crypto securities must register with the SEC. Furthermore, the securities law clearly stipulates that these platforms must not combine functions under a single umbrella, which poses conflicts and risks for investors.
Sun Yuchen's large withdrawal of coins may trigger a butterfly effect. According to Lookonchain's data at 12:00 on March 11, about 12 hours ago, #JustinSun（Sun Yuchen) Withdrew $80 million in stablecoins from #Huobi, including $40 million USDT and $20 millionUSDCand $20 millionUSDD. Then deposit $40 million in USDT and $20 million in USDC into #Aave and #JustLend。 Address 1:
https://tronscan.org/#/address/TPyjyZfsYaXStgz2NmAraF1uZcMtkgNan5/transfers
Address 2:
https://etherscan.io/address/0x3ddfa8ec3052539b6c9549f12cea2c295cff5296#tokentxns
Address 3:
https://etherscan.io/address/0x611f97d450042418e7338cbdd19202711563df01#tokentxns
Just now, Sun Yuchen made another deposit of 100 million USDC into Huobi.
Judging from the market, Sun Yuchen's move seems to have directly caused HT to plummet, and at the same time, cryptocurrencies also plummeted almost at the same time.
The US law enforcement authorities suspected a sell-off, and Bitcoin may have suffered a setback under pressure. According to GlassNode's March 8 on-chain data, wallets related to the seizure of BTC by US law enforcement authorities are being transferred, amounting to 40,000 pieces. Most of these appear to be internal transfers (so far), but approximately 9,861 BTC seized from the “Silk Road” hackers have been sent to our Coinbase Cluster (cluster). The relevant transaction address for the transfer to Coinbase is: https://mempool.space/tx/d43068e021701606724af16aeb8197a3530021d45a16d5b830b465da6c5ce9e6#vout=0
How will the Bitcoin market develop in the future?
How will the Bitcoin market develop in the future? This is probably still a common concern in the current market. We have previously analyzed it in “Bitcoin 2022 Review and Trend Outlook”, and this article believes this is still worth learning from. The core content is as follows: From a long-term perspective, the Fed's current interest rate cut cycle may coincide with Bitcoin's halving cycle, and is expected to become a big bully under the influence of both internal and external factors. Goldman Sachs's analytical team, led by Jan Hatzius, believes that the Federal Reserve is expected to raise interest rates once in 2023 and then keep interest rates in the 4.25% to 4.50% range until 2024. Subsequently, the Federal Reserve is expected to cut interest rates once in 2024. If Goldman Sachs analysts' predictions are not much different from the Federal Reserve's policy, then we can still expect a big bull market when Bitcoin halves in 2024. Bitcoin's next halving is expected to occur on April 20, 2024. If history repeats itself, according to Plan B's data model, then Bitcoin will rise to $36,000 before the next halving, and then to $149,000.
As for the short-term market, some Twitter Big V's also seem to be showing optimism. Crypto Big V CryptoChan (@0xCryptoChan) expressed it from the dimension of on-chain data: the three lines return to one, and the Mavericks rise. Breaking the market in the short term cannot shake the bullish trend.
Overall, the Fed's interest rate hike cycle is still continuing, and it is too early to talk about big bulls in 2023; in the short term, the market fluctuates greatly, so investors should be cautious. Judging from the technical chart, if BTC can successfully stand at MA200, then this means that 20,000 US dollars will probably be an important support level for the next round of the bull market, and now it may be in the early stages of the bull market.
Author: BitPushNews Asher Zhang
For more information, welcome to join:
Compared to the Discord community:https://discord.com/invite/QSvv7MZ2tz
Compare the TG exchange group:https://t.me/BitPushCommunity
Compare TG subscriptions:https://t.me/bitpush
Twitter:https://twitter.com/BitpushNewsCN
This article is from Twitter, link to the article:https://www.bitpush.news/articles/3786997The source must be indicated for reprinting
