Chris’ note: Last week brought some dramatic bank runs of the modern era. Most of the focus in the mainstream press has been on what it means for Silicon Valley. But there have also been massive reverberations in crypto.
We’ve seen some of the most dramatic volatility in crypto since it plunged into a bear market 15 months ago. And I know it’s got a lot of crypto investors worried.
So, here to shine a light on what’s going on is world-renowned crypto investor Teeka Tiwari. He’s been helping folks through the ups and downs since he first recommended crypto in 2016.
And as he shares below, although crypto didn’t cause this panic, crypto holders are right to be concerned… Because there’s a massive panic coming to crypto…
Over the past week, we’ve seen the biggest bank failures since the 2008 financial crisis.
This includes the collapses of two major lenders to crypto companies – Silvergate Bank and Silicon Valley Bank (“SVB”).
And it’s sent crypto markets haywire.
Bitcoin fell as much as much as 12% last Wednesday… before soaring more than 25%.
I know folks who own crypto are worried. So, today, I want to give you some context behind these bank failures… And to shed some light on why we could see another crypto panic later this month…
Scratching the Surface
Silvergate Bank and SVB both had a lot of exposure to the crypto market. So, I expect mainstream analysts to blame crypto for their downfall.
Circle, for instance, is the operator of the world’s second largest stablecoin, USD Coin (USDC). It keeps U.S. dollars on deposit to keep the value of USDC pegged to the value of the U.S. dollar. And it reported that $3.3 billion of its reserves are trapped in SVB.
Silvergate Bank was a major part of the plumbing of the crypto financial system. It allowed its clients move deposits in and out of crypto easily.
This made up about 70% of Silvergate’s business. And as of September, almost 25% of the bank’s deposits came from cryptocurrency companies.
But when you look beneath the surface, crypto played zero role in the fall of these banks.
Let me show you why…
Where the Trouble Started
The collapses were thanks to what Wall Street calls “duration mismatch.”
Long story short, these banks used long-term bonds to cover short-term liabilities.
They loaded up on long-term bonds when rates were below 2%. And that seemed like a good deal at the time because interest rates were near zero.
But since last March, the Fed has been jacking up rates… and causing bond yields to rise. And due to basic bond math, this has caused the price of these bonds to plunge.
And that’s where the trouble started for SVB…
To make up for the losses to its bond portfolio, it sold $2 billion of new stock to raise cash. And it sold off a bunch of assets.
That seemed sensible. But SVB’s CEO, Gary Becker, made news of the sales public on the same day Silvergate announced it was going under.
This spooked the Silicon Valley VC firms that advise the companies SVB catered to.
They advised the tech startups they’ve invested in to yank their cash out of SVB. And their message hit home. Over the weekend, SVB customers yanked $80 billion out of their accounts.
It couldn’t satisfy all the withdrawal requests. So the run on deposits was fatal.
This Volatility Isn’t Over
The SVB and Silvergate crashes will hit centralized crypto companies that were depositors with these banks.
For instance, before the government announced its rescue plan on Sunday evening, USDC was trading at 90 cents on the dollar. It broke its peg, in other words… something the folks who run it claimed it would never do.
And bitcoin plunged nearly 10% to below $20,000 on the news of the bank collapses.
I immediately put out a video alert to my subscribers. I told them bitcoin was a buy below $20,000. Since then it’s rebounded more than 25% to about $25,000.
Friends, we’re not at the end of this volatility… But again, this this isn’t a crypto problem. This problem was twofold…
First, when the Fed raises rates it imposes a financial penalty on banks holding long-term bonds as assets against their deposits. If the Fed keeps raising rates, this is only going to get worse.
Second, the bankers who bought these bonds were greedy and stupid.
Why would you buy long-duration bonds when the Fed is telling you it’s raising interest rates? It’s common knowledge that bond prices fall when interest rates rise.
And why would you not hedge your position? That’s insane.
These are supposedly highly educated people with years of industry experience. They’re overseeing billions of dollars. Now, they’ve blown up billions of dollars in shareholder value.
And although crypto wasn’t the cause of this panic, there’s still a massive panic coming to crypto… potentially before the end of this month.
Next Crypto Panic
The losses from this event could wipe out millions of crypto investors. But a select, well-informed few will make a life-changing gains.
If you’re in crypto or have been thinking about getting into crypto, please don’t do anything until I’ve share my latest research with you on this next panic.
On Wednesday, March 22, at 8 p.m. ET, I’m hosting a special event. It’s called The Crypto Panic of 2023.
I’ll explain everything about this next panic… and how it could completely remake and replace the current top crypto coins.
It’s free to attend. And I’ll even provide you with my top recommendation on how to play this panic FOR FREE. No strings attached.
So click here to a reserve your seat, and my team will automatically add you to my RSVP list.
Again, don’t take any action in the crypto market until you review my latest research.
Let the Game Come to You!
Editor, Palm Beach Daily
P.S. I also want to give you access to a series of tutorials that will show you how to get started investing in crypto, step-by-step, no matter your tech expertise.
Typically, these videos are locked behind a $2,500 paywall. But you’ll have them for free. All you need to do is upgrade to VIP.
When you upgrade, I’ll give you a special report called Teeka’s Secret to 10,000% Gains, which explains how I’ve given my readers the chance to turn volatility into huge profits.
Click here to learn more, and your email address will automatically be added to my RSVP list.