In the aftermath of Silvergate, Silicon Valley Bank (SVB) and Signature Bank, two powerful words are spinning around various media headlines: “banking crisis.” Are we in one? Is one coming soon? What can we do to protect ourselves?
Those are all valid questions and YouHodler will address them right now.
Is YouHodler affected by the recent bank collapses?
No. YouHodler did not have any exposure to Silvergate, SVB or Signature Bank. We do not have any accounts with these banks and we do not use them as payment processors. We pride ourselves on having a sustainable business model. We are not backed by an ICO, Venture Capital. Furthermore, we don’t have any native tokens to manipulate YouHodler’s financial data.
Is it a banking crisis right now?
Let’s first discuss the facts. This is the largest banking failure since 2008. Silicon Valley Bank was the U.S.A’s 16th largest bank and Signature bank was the 20th largest bank. As a result, many bank stocks saw heavy losses on Monday, March 13, 2020.
- First Republic Bank dropped 65% before trading stopped.
- Western Alliance Bancorp fell 60%.
- Charles Schwab – the 8th largest U.S. bank – dropped 10%.
Suggested reading: Check out YouHodler CEO Ilya Volkov sharing his thoughts on Signature Bank in this Forbes article!
It’s obvious people are selling bank stocks due to fear. Fear that this failure of regional banks will start to spread to other banks, causing further collapse. However, is this fear warranted? Look at the chart below:
Bank failures happen every year. At the peak in 2010, 157 U.S. banks failed. So looking at this chart, it seems we have nothing to worry about in terms of the number of bank failures. But if we dig into the data a little bit deeper, we can draw some interesting conclusions.
For example:
- Data from the FDIC states there are approximately 400 bank mergers every year.
- JP Morgan Chase, Bank of America, CitiGroup and Wells Fargo hold over 40% of banking industry assets.
- This implies bank consolidation is real and consistent.
Therefore, there are fewer bank failures today than in the past because there are simply fewer banks. They are getting absorbed by the “Big Four.”
If we judge the total assets of Silvergate, SVB and Signature Bank, that would put us somewhere in the middle of the chart above. Meaning we are seeing some turbulent activity close to what happened from 2007 – 2009 but not worse. There’s no reason to hit the panic button though.
How to find opportunities in a potential banking crisis
There is a silver lining in all of this. The cryptocurrency market has responded exceptionally well to this news. That is for a few reasons:
- People are feeling positive because we avoided a large banking crisis.
- People are fearful of banks and choosing cryptocurrency over legacy banking.
- Bears are trapped by funding rates and a short squeeze is occurring.
The main point to pay attention to is the cryptocurrency market always responds to big events in the traditional market. The two worlds are connected and that connection presents opportunities.
Whether we dodged a major banking crisis or are just in the early stages of another 2008-level recession, we can say for sure more volatility is on the horizon.
Whether that’s bullish or bearish volatility remains to be seen. However, volatility of any kind is something we all should look forward to. Volatility presents opportunities to long and short the market. It also allows you to buy cryptocurrency assets at a discounted rate or sell cryptocurrencies at a higher rate.
There are a variety of ways one can play with volatility and benefit. YouHodler provides you with easily-to-use tools to do so (e.g. Multi HODL, Dual Asset, crypto exchange and more).
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Disclaimer: “The content should not be construed as investment advice and does not constitute an offer or solicitation to offer or recommendation of any investment product. It is made available to you for information and/or education purposes only.
You should take independent investment advice from a professional in connection with, or independently research and verify any information that you find in the article and wish to rely upon.”
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