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Tesla's stock price to fall below $100?! It is reported that Tesla's vehicles are not allowed to enter government institutions in China. Recently, there have been news that some cities in China have been planning restrictions, which will limit Tesla's access to more places. If this news is true, it will be very unfavorable for Tesla. China is a populous country with a huge demand for vehicles, especially given the strong support from the Chinese government for new energy vehicles. By the end of 2022, Tesla's sales in China ranked first in the region. If Tesla loses the Chinese market, the consequences can be imagined, and its stock price may fall below $100! Follow me and you'll get more interesting investment information! Plus, I'll share real-time trading strategies during trading hours, including stocks, gold , crude oil , forex, cryptocurrencies, and more!
NASDAQ:TSLAShort
by EagleEyeStrategy
2
British pound's rally fizzles as markets settle downThe British pound has reversed directions after an impressive rally that saw GBP/USD climb 370 points. In the European session, GBP/USD is trading at 1.2154, down 0.24%. The collapse of the Silicon Valley Bank (SVB) on Friday sent the financial markets into turmoil on Monday. US bank stocks declined sharply, while safe-haven gold powered higher. The US dollar retreated against the major currencies and the 2-year Treasury yield fell almost a full point. Tuesday has brought better news, as the markets appear to have settled down. The US dollar has regrouped and is higher against the majors. There is an uneasy calm in the air, but that doesn't necessarily mean that this latest crisis is behind us. Investors are on alert and will be very sensitive to new developments and any negative news could renew market volatility. The Fed and Treasury Department acted quickly to protect depositors and President Biden sent a reassuring message at an impromptu television address, but the collapse of the 16th largest lender in the US means it's unlikely to be "business as usual" for some time. It was just a week ago that Fed Chair Powell's hawkish testimony on the Hill raised expectations of the Fed delivering a 50-bp increase at the March 22 meeting. Those expectations have vanished into smoke, with the markets now expecting a 25-bp hike, with an outside chance of a pause.  We could see further market repricing after today's CPI report, with headline CPI expected to fall to 6.0%, down from 6.4%. In the UK, the employment report was within expectations. The unemployment rate remained at 3.7%, shy of the estimate of 3.8%. Hourly earnings fell to 5.7%, as expected, down from an upwardly revised 6%. The pound hasn't reacted to the release and the data is unlikely to change minds at the Bank of England, which is expected to raise rates by 25 bp at the March 23 meeting. GBP/USD tested resistance at 1.2113 earlier in the day. Above, there is resistance at 1.2294 There is support at 1.1984 and 1.1854
by OANDA
1
SVB: Understanding and Managing Interest Rate Risks CBOT: 10-Year Treasury Futures ( CBOT:ZN1! ) Last Wednesday, Silicon Valley Bank (SVB) NASDAQ:SIVB announced that it incurred $1.8 billion loss in the sales of its bond portfolio and sought to issue new shares. Within 48 hours, a bank-run induced by panic customers brought down the legendary bank. On Friday, US banking regulators seized control of SVB. By Sunday, the Treasury Department, the Federal Reserve, and Federal Depository Insurance Corporation (FDIC) jointly announced a rescue plan that would make whole all depositors. However, SVB shareholders are not protected. Why has happened to the well-respected and once well-capitalized bank? Opportunity and Risk Go Side-by-Side Traditional banks seldom extend credit to startups, which are mostly under-collateralized, with little or no profit and big uncertainties about their future survival. SVB developed a niche competitive edge to provide banking services to companies funded by venture capitals. In the past 40 years, it nurtured many high-profiled tech startups through their entire life cycle, from early-stage to IPO and to Big-Tech giants. If Sequoia Capital invested in your firm and you apply for a loan from a commercial bank, you can expect the loan officer to ask: “Sequoia Who?” But if you go to SVB, they would say: “$10 million will be in your account tomorrow.” VCs are exceptionally good at spotting future technological trends, and they follow a rigorous due diligence process to pick investing targets. By working with VCs and startups closely, SVB created an ecosystem that foster technological innovations, and grew to become the 16th largest US bank by deposit. However, SVB’s concentration in the high-tech sector also make it vulnerable to a boom-and-bust cycle. Last year, bear market hit the industry hard. Publicly traded firms couldn’t raise money with falling share prices. Private companies found the path to IPO got blocked. As startup clients withdrew deposits to keep their companies afloat, SVB is short on capital. It was forced to sell most available-for-sale bonds at a huge loss. Bad news travelled fast in close-knit tech investing community. VCs urged their portfolio companies to get the hack out of SVB. All told, customers withdrew a staggering $42 billion of deposits on Thursday. By the close of business day, SVB had a negative cash balance of $958 million, according to the filing, and this triggered the government takeover. A Commercial Bank with a Failing Grade In fiscal year 2022, SVB earned $4.5 billion in Net Interest Income (NII) and $1.7 billion in non-interest income. When you take away the bells and whistles, SVB is by large a commercial bank. About 73% of its revenue comes from taking in deposits at a low interest rate and making loans at a higher interest rate. Based on its 2022 10K filing, SVB managed $209.2 billion in total interest-bearing asset and earned $5.7 billion. This represented an effective yield of 2.73%. During the same period, SVB paid out $1.2 billion in funding cost, which equated to 0.57%. • Therefore, in 2022, its NII = 2.73% - 0.57% = 2.16% • In comparison, its NII for year 2021 was 2.02% (=2.09% - 0.07%). • On the surface, SVB was doing well, with NII spread increasing by 14 basis points year-over-year. What has gone wrong then? Dive deeper into SVB’s balance sheet, we see the long-dated Treasury bonds and illiquid mortgage-backed securities it held got hammered by the rising interest rates. Simply put, SVB got its interest payment back, but the value of its investment principal eroded in a huge way in a rate-hiking environment. All in all, managing interest rate risk is at the core of banking business. A Naked Bond Portfolio In its 10K, SVB puts its investment portfolio in Available-For-Sales (AFS), Held-To-Maturity (HTM) and Non-marketable securities categories. AFS balance was $26.1 billion as of December 31st, including: • U.S. Treasury securities $ 16,135m (61.9%) • Agency-issued MBS $6,603m (25.3%) • Agency-issued CMBS $1,464m (5.6%) • Foreign government debt securities $1,088m (4.2%) • Agency-issued CMO—fixed rate $678m (2.6%) • U.S. agency debentures $101m (0.4%) • Total AFS securities $26,069m (100%) Last week, SVB sold $21 billion in the AFS portfolio and incurred a loss of $1.8 billion, or -8.6%. AFS assets are marked to market every quarter. My understanding is that the loss figure was based on selling price vs. year-end fair market value. Total loss calculated from purchasing price could be much bigger, as these bonds may have been marked down multiple times during previous quarters. Evidence: Since March 2022, CBOT 10-Year Treasury Futures (ZN) price went down from 124 to 109 (-12%) and 30-Year Treasury Bond (ZB) fell from 152 to 118 (-22%). CBOT Treasury futures market, with its sheer size and liquidity, makes it the marketplace of choice to manage interest risk in times of uncertainties. Each ZN contract has a notional value of $100,000. • On Monday March 13th, daily trading volume is 3,760,911 lots, which translates into total notional of $376 billion. Open interest (OI) stands at 4,311,338, or $431 billion in notional. • Volume and OI for ZB are 719,518 and 1,209,881, respectively. Notional value for each is $72 billion and $121 billion, respectively. What’s Next On Friday, Signature Bank customers spooked by the SVB collapse withdrew $10 billion. That quickly led to the bank failure. Regulators announced Sunday that Signature was being taken over to protect its depositors and the stability of the U.S. financial system. Despite government intervention over the weekend, fear ran contagious through the financial industry this Monday. San Francisco’s First Republic Bank, which had $212 billion in assets at the end of 2022, saw its stock price plunge as much as 70% when the market opened Monday morning. By market close, US stock market stabilized. Investors wonder if a banking crisis could be the final punch to end the year-long Fed rate hikes. Lessons Learnt As investors, we usually allocate our financial assets across various instruments, such as stocks, bonds, and derivatives. The 60 (stock) / 40 (bond) portfolio is the most popular advice from Wall Street. People generally pay more attention to what stocks to buy and hold, but we may not think twice about managing interest risk in a rising rate environment. The SVB fallout shows that even the safest, risk-free Treasury bonds, if not actively managed, could fall prey to interest rate changes and liquidity risk, resulting in loss of market value. For me, this is a wake-up call and a good time to review my bond holdings. Some may be hidden in a 401K retirement plan. Hedging interest rate risk with CBOT Treasury futures and Micro Yield futures could go a long way to stay solvent. A View on Interest Rate Trajectory Today, the Bureau of Labor Statistics reports that the consumer price index rose 0.4% in February and 6% from a year ago, in line with market expectations. This is the most recent data the Fed will consider before it makes interest decision on March 22nd. Inflation is cooling, but still too high. A bank run shows how damaging rising interest rate is to the economy. Whether the Fed will continue its rate hikes, pause them, or end them altogether, I think all options are open. In my view, interest rate is in an uncharted territory once again. With investors in panic mode, they will likely overreact to the Fed decision. This may be a good time to place an order of out-of-the-money options on CBOT 10-Year Treasury Futures (ZN). On March 14th, the June ZN contract is quoted at 113’220. Quoting convention in Treasury market is 100 and 1/64th. The quote reads as (113 + 22.0/64), or $113.34375 on $100 par value. If the Fed slows or pause the hike, Treasury price will likely go up. Call options would be appropriate in this case. • The 115-strike call is quoted 0’20 (=20/64). This is converted into $312.5 premium on the $100,000 contract notional for each contract. If the Fed stays its course on fighting inflation, Treasury price could fall. And put options would be a way to express your view. • The 112-strike put is quoted 0’14, or $218.75 premium per contract. Happy Trading. Disclaimers *Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services. CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
CBOT:ZN1!Long
by JimHuangChicago
6
Silicon Valley Bank and the crypto industry, what is going on?In recent days, our team of analysts and traders has had several in-depth discussions regarding the current situation facing the global banking industry, and we have come to the conclusion that there is no conclusion. SVB's bankruptcy has been particularly overblown in the media, and few have highlighted the fact that this credit institution had assets of less than 250 billion and that Tier1 did not even include assets available for sale. It was no coincidence that the regulators had not noticed the loss the bank was making due to the write-down of U.S. bonds. When start-ups and other cash-strapped tech companies demanded their money back, SVB had to sell its assets at a loss, and we already know the rest of the story. If we think about it for a moment, this problem should therefore affect all smaller entities, including certain DeFi financial protocols that are totally unregulated. To clarify, where do you think the dollars that cover the value of a Theter are invested? Here is where the risk becomes real. In summary, the problem lies in the instability of bond market prices, and the only way not to create an apocalyptic environment is to make sure that these realities can manage to sell their assets at least at maturity, otherwise we can say goodbye to these financials and with them many other businesses, even if they are related to other activities. What happened to USDC should give pause for thought: do you think the risks have disappeared just because stablecoin has reached the peg? The risks have not disappeared at all, only the capital loss of those who had USDC in their portfolio has disappeared, and that is not the same thing. Similarly, it scares me to see the enthusiasm of "crypto experts" rekindled after the BTC pump. These top investors are too busy tweeting and insulting the mainstream to realize that this situation could devastate the decentralized sector. Those who question whether the crypto sector or the traditional sector is better are asking the wrong question because apparently one is strictly dependent on the other, as our team has been trying to make the maximalists understand for years.
by cryptohubble
1
Rate hikes in jeopardy?Over the past few days, we have seen the second and third largest bank failures in US history. A question remains whether we have seen the last of these failures and what other ripple effects could occur. In the currency markets, the dollar index dropped below 104, reaching a three-week low for the third consecutive session. Signature and Silicon Valley Bank's failure has sparked speculation that the US Federal Reserve might adopt a less aggressive policy tightening approach at its next meeting, with Goldman Sachs even suggesting a pause. Money markets now indicate a more than 70% probability of a 25-basis-points hike next week, a sharp reversal from the previous week. However, a better-than-anticipated US jobs report published on Friday supports the argument for further rate increases. Investors are anticipating important US inflation data on Tuesday, which will provide insight into the central bank's rate-hike trajectory. Some of the best performers in the face of the US dollar decline has been risk-sensitive currencies such as the Australian (+1.40%) and New Zealand dollars (+1.45%). The British pound is also on the leader board, appreciating +1.3%. Perhaps suggesting a vote of no-confidence in traditional banking, Bitcoin has experienced an 18% surge over the last 24 hours, surpassing $24,200, its most significant daily gain in almost a month. Elsewhere, Gold is up +2.4% to $1,911, its highest level in over a month.
TVC:DXY
by BlackBull_Markets
Euro hits 1-month high as Silicon Valley Bank collapse weighs onThe euro has posted sharp gains at the start of the week, extending its rally against a retreating US dollar. In the North American session, EUR/USD is trading at 1.0740, up 0.95% and its highest level since February 15. Perhaps it is fitting that today's economic calendar has no US or European releases, allowing investors to focus their full attention on the fallout from the collapse of the Silicon Valley Bank (SVB). This is the largest US bank to fail since 2008 and understandably, investors are alarmed that the contagion could spread and the US banking system could be at risk. Over the weekend, New York officials closed Signature Bank, one of the main banks in the cryptocurrency sector. The US government acted decisively and said SVB depositors (but not investors) would be protected and President Biden made a television appearance to reassure a nervous public that the banking sector is safe and those responsible for the SVB collapse would be held accountable. The fact that Biden had to address the nation reflects fears that the SVB failure could trigger a full-blown banking crisis. The SVB collapse has sent the US dollar in retreat against the majors, as the market expectations of a 50-bp hike from the Fed next week have evaporated. Just last week, the markets had priced a 50-bp hike at 70% and a 25-bp increase at 30%. That has shifted to a 70% likelihood of a 25-bp increase and a 30% chance of the Fed taking a pause, with a zero chance of a 50-bp hike. Goldman Sachs had projected a 25-bp last week but now expects the Fed to pause. The US releases CPI on Tuesday and the release was expected to play a key role in the Fed rate decision, but that was before the SVB collapse triggered a massive repricing in the markets. Still, the inflation report will be widely watched by investors and by the Fed. Headline inflation is expected to fall to 6.0% in February, after a 6.4% gain in January. EUR/USD is testing resistance at 1.0718. The next resistance level is 1.0798 There is support at 1.0622 and 1.0542
by OANDA
Interpreting the Silicon Valley Bank Incident After the COVID-19 pandemic in 2020, the Federal Reserve used monetary policy to fight the pandemic, and household savings deposits reached about $1 trillion, with broad money M2 growing by over 25%. Many people were bullish on the US stock market, believing that these huge amounts of idle cash would one day enter the market as stocks. Obviously, many people forgot the double-entry accounting principle - for every credit, there must be a corresponding debit. For Silicon Valley Bank, with deposits of over $100 billion, all of its depositors are the largest and bluest venture capital companies and technology newcomers in Silicon Valley, including Peter Thiel's Founder's Fund. Since the Federal Reserve interest rate is zero, they bought the world's safest assets - short-term US bonds, and even earned some interest. However, the good times did not last. By the end of 2021, US inflation began to soar, and the Federal Reserve's monetary policy began to lose control, causing short-term US bond yields to soar, leading to the biggest US bond market crash in over 200 years in 2022. Suddenly, the world's safest asset became the storm's eye, and the US bond holdings in Silicon Valley Bank's account began to bleed. Even if they haven't sold yet, accounting requires mark-to-market valuation. The Silicon Valley market price loss has exceeded its total equity. Rating agencies wasted no time in preparing to downgrade Silicon Valley Bank's rating. However, deposit rates remain close to zero. Americans don't want to be harvested like this, so they began to withdraw their bank deposits and buy money market funds that now yield nearly 4%. If Silicon Valley Bank significantly raises its deposit interest rates, its interest margin income will be reduced, and it will have to pay additional liquidity. At this time, Silicon Valley found itself in a dilemma. Investment bank Goldman Sachs saw commission opportunities and began to suggest that Silicon Valley sell part of its US bond portfolio and sell $2.25 billion of its stocks to replenish capital. This idea was really bad: data disclosed during the roadshow showed that Silicon Valley's customers were withdrawing large sums of money, causing a significant loss of deposits. If it weren't for the roadshow disclosure, the market wouldn't know the details. Now, the market believes that Silicon Valley is about to go bankrupt, accelerating the run on the bank. Since Silicon Valley's customers are all big clients with deposits far exceeding $250,000, more than 95% of Silicon Valley Bank's deposits are not covered by the US deposit insurance limit of $250,000. There must be many other regional banks using similar methods for cash management. Today, they are bound to face the same risks as short-term US bond yields soar. This also explains why the market unilaterally believes that the Federal Reserve will soon stop raising interest rates. Their actions determine their fate. Of course, the Federal Reserve's monetary policy must now consider the impact on the US banking industry. Chairman Powell has recently been saying that he needs to "consider the totality of data." Last night, the market hid in the short-term US bonds out of safe haven demand, causing yields to plummet. Many people continue to be indifferent to the historic inversion of the US bond yield curve. In fact, the inversion of the yield curve is a distortion of risk, which is not sustainable. Its reversal will cause a cataclysmic event. Although long-term risks are stable, short-term risks are high. We need to survive the short term to see the long term. "But such long-term predictions are of no use for the present. In the long term, we are all dead. Economists have it too easy, because their work is useless. At the onset of a storm, economists can only tell us that the storm will pass, and that the ocean will be calm again." - Keynes Now, the global market is concerned: Will Silicon Valley Bank be rescued? Many experts believe that if the US regulatory authorities do not intervene, Silicon Valley will become the second Lehman, which will bring down the US financial system. The market needs to see three measures for rescue: 1) Small depositors with less than $250,000 should receive full payment; 2) Depositors with deposit insurance limits over $250,000 should receive partial payment, and it should be ensured that in the future, depending on the sale of Silicon Valley Bank assets, these large depositors can receive most of their payment (such as 80%); 3) Let one of the four major US banks take over Silicon Valley Bank. The problem now is that less than 3% of Silicon Valley Bank deposit balances are below $250,000. Others are large and blue, including Silicon Valley venture capital companies such as Sequoia Capital, Paradigm, a16z, and GGV Capital. Many Silicon Valley companies involve funds ranging from hundreds of millions to tens of billions. No wonder Silicon Valley was squeezed for more than $40 billion before being taken over. Under such pressure, almost no bank can survive. Unfortunately, US law may not allow it. If the Federal Reserve intervenes, the Silicon Valley crisis must meet the definition of "systemic risk" and there must be "broad-based" risks, and it cannot only benefit a particular company. At the same time, the Federal Reserve cannot intervene in bankrupt companies that have already been taken over. The US Treasury cannot use unlegislated funds without congressional approval, and now there is no money left. In the end, it seems that FDIC has to bear the burden alone. The process of selling Silicon Valley assets to pay large depositors has already begun. It is reported that hedge funds have offered to buy Silicon Valley Bank's deposits at 60%-80% of their value. In times of crisis, Silicon Valley assets can be realized for 60%-80% of their value, and after the panic in the US market subsides, the price should be even higher. After all, US Treasury bonds trade up to $650 billion every day. Will the Federal Reserve open the floodgates again because of Silicon Valley Bank? In fact, Silicon Valley's bankruptcy is precisely due to the Fed's unbridled printing of money, which caused a sharp drop in US bond yields and a surge in savings deposits. If money is printed again using Silicon Valley as an excuse, the Fed's only remaining credibility will be gone. When Lehman collapsed, its assets were worth $640 billion, and its associated derivative contract amounted to trillions of dollars. It was indeed a decisive moment. However, the assets of Silicon Valley Bank this weekend were only $220 billion, and it still held a large number of highly liquid US Treasury bonds. Previously, the market believed that the US economy would not decline, but the Federal Reserve's decision to slow down the pace of interest rate hikes, and even stop them soon, made the combination of economic and policy expectations logically hard to convince. During this cycle of rate hikes, Federal Reserve officials maintained a dovish stance until the end of 2021, believing that inflation would be a "transitory, temporary phenomenon." They then changed their tune in 2022, saying that this round of inflation will be "higher and longer." In both recent history and ancient times, the Federal Reserve's forecasting record seems to be lacking. Overnight, the two-year US Treasury yield skyrocketed by more than 5%, the first time since 2007. The degree of inversion of the US Treasury yield curve is the most severe since 1981. Many people mistakenly believe that the inverted US Treasury yield curve is terrifying. In fact, it is more terrifying when the yield curve returns to normal from inversion because this is the moment when the US economy officially enters into a recession. Follow me and you'll get more interesting investment information! Plus, I'll share real-time trading strategies during trading hours, including stocks, gold , crude oil , forex, cryptocurrencies, and more!
S
by EagleEyeStrategy
2
Buy Fear & Sell Greed: Last Round Of Discount.With the collapse of Silvergate Bank and Silicon Valley Bank, the bears have took the upper hand in crypto market during the last few weeks. Even though the fact that USDC has depegged is troubling and their 3.3B deposit at SBV even more so. It will take a bit more convince me we have arrived in a new 2008 scenario. In short SBV was mismanaged, they betted heavily on overvalued VC's and startups with Powell's QE money and ofcourse, they lost when the bubble popped. What can one say when they hired an ex-CFO from Lehman Brothers and a CEO who dumped millions worth of stock before this all unfolded. Circle has announced to fill any gap with corporate funds and with backing from BlackRock amongst other giants they should be able to manage the situation. Yet, in the current environment I wouldn't vouch for any exchange or stable coin. With the exit of Silvergate and potential issues at Signature Bank I wouldn't trust an offramp (sell your crypto and initiate a withdrawal to your bank account) either. It leads me to one conclusion, probably you're safest bet is self custody of fundamentally strong crypto projects. For one simple reason: stable coins are replaceable, we've seen that already post-UST crash. They require capital and a relatively simple technical infrastructure. Yet, projects like Bitcoin, Ethereum or infrastructure crypto projects are not so easily replaceable. If you have a long term horizon, these projects will make their way back. Technically, I see trend exhaustion here. A potential head and shoulders is forming and even though the massive amount of FUD, the crypto market hasn't really set a new low since June 2022. Money Flow divergence is positive and we saw massive amounts of volume on Bitcoin last Friday but price did not crash - corrected, yes - but no double digit flash crash. This means one thing only, there are buyers and likely, these buyers are not your average Joe who panic sold his crypto bags. Personally, I bought the December bottom (see linked analysis) and I'm not planning to give away my macro bottom entry. Yes, nothing is for certain in the market and we could drop much lower, but that's the name of the game in investing or trading - nothing is for certain. Yet, I have a simple rule: buy the fear, sell the greed. Good luck, friends!
CRYPTOCAP:TOTALLong
by cryptobullethbtcxlm
6
SPX 2023 VS SPX 2008, Is it possible for this to happen again?The S&P 500 Index (SPX) is a stock market index based on the market capitalizations of 500 large companies having common stock listed on the New York Stock Exchange or NASDAQ. The index has been widely used as a gauge of the US equity market's performance, and it has been around since 1923. In 2008, the world witnessed one of the worst economic crises in history. The financial crisis of 2008, also known as the global financial meltdown, was a severe worldwide economic crisis that resulted in the collapse of the housing market, the banking system, and the stock market. The S&P 500 index was no exception and suffered greatly during this time. Fast forward to 2023. Recently, the failure of SVB bank has caused a ripple effect that is impacting many startups. This failure has led to a tightening of credit lines and a general sense of unease in the startup community. Many startups are finding it difficult to secure the financing they need to continue operating and growing. Some businesses have shut down, unemployment rates are soaring, and the stock market is experiencing extreme volatility . Many investors are wondering if the current situation is similar to that of 2008, and if the history will repeat itself. The answer is not straightforward, as there are both similarities and differences between the two crises. One similarity is the extreme volatility in the stock market. In both 2008 and 2023, the stock market experienced sharp declines and significant rebounds, causing investors to panic and sell their stocks. Here are some significant events that took place during the 2008 financial crisis, which was one of the worst economic crises in history. This crisis, also known as the global financial meltdown, caused the collapse of the housing market, the banking system, and the stock market. The S&P 500 index was no exception and suffered greatly during this time. On June 1, 2008, the Federal Reserve provided $225 billion in liquidity through its Term Auction Facility, which was a temporary measure to add liquidity. On July 11, 2008, IndyMac bank failed, and oil prices peaked at $147.50. In August 2008, unemployment in the US reached 6%. On September 15, 2008, Lehman Brothers, a global financial services firm, filed for bankruptcy with $639 billion in assets and $613 billion in liabilities. On September 16, 2008, the Federal Reserve took over American International Group ( AIG ) with $85 billion in debt and equity funding. The Reserve Primary Fund "broke the buck" due to its exposure to Lehman Brothers securities. On September 17, 2008, investors withdrew $144 billion from U.S. money market funds, equivalent to a bank run on money market funds. These funds frequently invest in commercial paper issued by corporations to fund their operations and payrolls, causing the short-term lending market to freeze. On September 26, 2008, Washington Mutual went bankrupt and was seized by the Federal Deposit Insurance Corporation after a bank run in which panicked depositors withdrew $16.7 billion in 10 days. On September 29, 2008, the House of Representatives rejected the Emergency Economic Stabilization Act of 2008, including the $700 billion Troubled Asset Relief Program, with most Democrats in support and Republicans against. In response, the DJIA dropped 777.68 points, or 6.98%, then the largest point drop in history. The S&P 500 Index fell 8.8%, and the Nasdaq Composite fell 9.1%. Several stock market indices worldwide fell 10%. Gold prices soared to $900/ounce. The Federal Reserve doubled its credit swaps with foreign central banks as they all needed to provide liquidity. On October 16, 2008, a rescue plan was unveiled for Swiss banks UBS AG and Credit Suisse. On October 24, 2008, many of the world's stock exchanges experienced their worst declines in history, with most indices dropping around 10%. In the U.S., the DJIA fell 3.6%, although not as much as other markets. On March 6, 2009, the Dow Jones hit its lowest level of 6,469.95, a drop of 54% from its peak of 14,164 on October 9, 2007, over a span of 17 months, before beginning to recover. On March 10, 2009, shares of Citigroup rose 38% after the CEO said that the company was profitable in the first two months of the year and expressed optimism about its capital position going forward. Major stock market indices rose 5–7%, marking the bottom of the stock market decline. These events had a significant impact on the global economy and the financial markets. The crisis was caused by a housing bubble and the collapse of the banking system. The Federal Reserve implemented quantitative easing, a program that involved buying large amounts of securities to stimulate the economy. While there are similarities between the current economic crisis and that of 2008, there are also significant differences. It is difficult to predict whether history will repeat itself, but one thing is certain: the stock market will continue to be volatile, and investors should be prepared for both ups and downs. Based on the 2009 crisis, there was an opportunity to short foreign markets as they typically receive news slightly after us and experience a delay effect. Another opportunity was the inverse relationship between the dollar and gold caused by the Fed's bailouts, along with the dollar and other commodities .
Editors' picks
SP:SPX
by WallSt007
9
March13 BTCUSD BingX Chart Analysis and Today's HeadlineBingX’s Bitcoin Chart Bitcoin is up 9.55% over the last 24 hours and rose to an intraday high of $22,600.00. The largest cryptocurrency has rebounded above $22,000 after stablecoin issuer Circle announced the company will stand behind USDC and cover any shortfall using corporate resources, involving external capital if necessary. The rebound witnessed today has resulted in the relative strength index (RSI) returning to a neutral position, indicating a substantial decline in the short-term selling pressure. If the price maintains above $22,000, the BTC/USDT pair may reach $22,800. Today’s Cryptocurrency Headline SVB Draws Support From More Than 100 Investors and Venture Firms According to Bloomberg, more than 100 venture capital and investing firms have signed a statement supporting Silicon Valley Bank, part of mounting industry calls to limit the fallout of the bank’s collapse and avoid a possible “extinction-level event” for tech companies. As of Saturday afternoon in San Francisco, about 125 venture firms including Sequoia Capital had signed on to the statement, spearheaded by venture firm General Catalyst, according to a person familiar with the matter. First released Friday by a smaller group of signatories, the statement called the events of the last two days “deeply disappointing and concerning,” and said that the investors would continue relationships with the institution if it were bought by another entity. Disclaimer: BingX does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products, or other materials on this page. Readers should do their own research before taking any actions related to the company. BingX is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods, or services mentioned in the article.
by BingX
SVB, Silvergate Collapse & Affect on CryptomarketHi Traders, Investors and Speculators of the Charts 📈📉 Ev here. Been trading crypto since 2017 and later got into stocks. I have 3 board exams on financial markets and studied economics from a top tier university for a year. In a twist of events, an incident that happened within the banking realm created chaos for the crypto realm. I bet you didn't have that on your bingo cards for 2023... In the past few weeks, there have been two significant bank failures in the United States that have sent shockwaves throughout the financial world. The collapse of Silicon Valley Bank and Silvergate Bank has sparked concerns about the stability of the banking system and the future of the crypto industry. The failure of these banks highlights the fragility of the financial system and the challenges faced by institutions that operate in high-risk sectors like tech and crypto. Silicon Valley Bank ( SVB ) was closed by the FDIC on March 9 due to its heavy losses caused by the downturn in technology stocks and the U.S. Federal Reserve's aggressive plan to increase interest rates. The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by the US Congress in 1933 to maintain stability and public confidence in the nation's financial system. The FDIC provides deposit insurance that guarantees the safety of deposits in member banks, up to a certain limit. In the event that a member bank fails, the FDIC will step in to insure deposits, provide assistance to depositors, and liquidate the failed bank's assets. The FDIC also regulates and supervises member banks, as well as conducts research and analysis on the banking industry. Silicon Valley Bank bought bonds using customers' deposits, but the value of those investments fell as interest rates rose. This is usually not a problem for banks, but Silicon Valley Bank's customers were largely startups that needed cash. Venture capital funding was drying up, and companies were tapping their existing funds deposited with Silicon Valley Bank, which was at the center of the tech startup universe. In response to this liquidity crisis, SVB sold a $21bn bond portfolio at a loss of $1.8 billion. The bank attempted to fill the solvency hole with a combined equity offering of $2.25bn on March 8, but the attempt failed. This is the largest failure of a financial institution in the United States since Washington Mutual collapsed more than a decade ago. The closure of SVB had an immediate effect on some startups that had ties to the bank, as they scrambled to pay their workers and feared having to pause projects or lay off employees until they could access their funds. SVB , the 16th largest bank in the US, had assets of $209 billion, with more than 50% of its investments tied up in long-term securities, including exposure to the Silicon Valley tech and health startup world. The bank's sudden collapse has raised questions about its risk management practices, and the impact of its closure on its clients, who are largely startups and wealthy tech workers. The bank's large uninsured deposits and exposure to high-risk sectors like tech and crypto contributed to its downfall. But SVB isn't the only one... Silvergate Bank, which has been a significant player in the crypto world, has announced that it is closing and returning deposits. The bank's holding company, Silvergate Capital Corporation, stated that the decision was made "in light of recent industry and regulatory developments." The closure follows the loss of one billion dollars in a quarter after customers withdrew $8.1 billion, and a subsequent filing in March revealing even worse financials. The closure of Silvergate Bank is concerning for the crypto industry, as it may lead to companies turning to less regulated institutions for their banking needs, potentially making the space even riskier. Coinbase, Crypto.com, and Paxos have already started moving away from the bank. The collapse of the bank will likely draw scrutiny from lawmakers who are concerned about the crypto contagion affecting the traditional financial sector. The Silvergate Exchange Network, which allowed crypto exchanges like Coinbase, Gemini, and Kraken to move money between themselves and other institutions, has also been shut down. The bank's financial struggles have been ongoing for some time, with some of its high-profile clients like FTX and Genesis also experiencing challenges. Silvergate's collapse raises concerns about the future of the crypto industry, as companies may turn to less regulated institutions for their banking needs, potentially making the space even riskier for everyone involved. The bank's failure is also likely to draw scrutiny from lawmakers concerned about the potential contagion of the crypto industry on the traditional financial sector. Late Friday night Coinbase, a popular cryptocurrency exchange, announced that it would suspend conversions for the USDC stablecoin. This led to a rush of people trying to sell their USDC holdings, causing it to depeg from its value of $1 and trade as low as $0.87 before recovering to $0.92. Another stablecoin, Dai, also depegged and experienced a high volume of trading. Stablecoins are important in the cryptocurrency market as they provide a way for traders to move funds between different exchanges or cryptocurrencies without having to convert back to fiat currency. They are also used as a store of value by some cryptocurrency investors who prefer a more stable asset compared to the volatility of Bitcoin or other cryptocurrencies. If stablecoins depeg permanently, it could lead to a loss of confidence in their stability and reliability. This could potentially cause a sell-off of stablecoins and a shift towards other assets perceived as more stable, such as traditional fiat currencies. But before we panic too hard and FUD out, it's important to note that the impact of this crisis on cryptocurrencies such as alts and Bitcoin would depend on the severity and duration of the stablecoin depegging event, as well as other market factors such as investor sentiment and regulatory actions. In the past, there have been instances of stablecoins temporarily depegging from their underlying assets without significant impact on the broader cryptocurrency market. One notable example of a stablecoin depegging in the past is the case of Tether (USDT) in 2018. Tether is a stablecoin that is pegged to the value of the US dollar , with each USDT token representing one US dollar . In October 2018, Tether's price dropped below the $1 peg on several cryptocurrency exchanges, leading to concerns about the stability of the stablecoin. The depegging was attributed to a variety of factors, including regulatory pressures, concerns about Tether's reserves, and a general market downturn. The depegging led to a sell-off of Tether and a shift towards other stablecoins such as USD Coin ( USDC ) and TrueUSD (TUSD), which saw increased demand as traders and investors sought more reliable alternatives. Despite the depegging of Tether, the broader cryptocurrency market did not experience a significant impact, with Bitcoin and other cryptocurrencies largely unaffected. However, the incident highlighted the potential risks and uncertainties associated with stablecoins and their reliance on centralized institutions to maintain their pegs. In terms of price action for the immediate term, the Tether (USDT) depegging event in 2018 did have some impact on the cryptocurrency market prices, although the impact was relatively limited and short-lived. Following the depegging of USDT, there was a brief sell-off of Tether and a shift towards other stablecoins such as USD Coin ( USDC ) and TrueUSD (TUSD). This led to increased demand for these stablecoins, which helped to maintain their pegs to the US dollar . However, the broader cryptocurrency market, including Bitcoin , was largely unaffected by the Tether depegging. While there was some initial volatility and uncertainty, the market quickly stabilized and resumed its upward trend. 💭The collapse of Silicon Valley Bank is the second-largest bank default in U.S. history and puts the golden trifecta rule of banking (liquidity, solvency, and profitability) into review. This failure reminds us of the unintended consequences of unorthodox monetary policies, pandemic remediation measures, excessive leverage, and democracy eroding rulings. SVB had significant exposure to long-term securities and the Silicon Valley tech and health startup world. The bank's uninsured deposits pose a problem but insured deposits will be available as soon as Monday. The collapse of Silicon Valley Bank and Silvergate Bank underscores the need for stricter regulatory frameworks and tighter risk management practices in the financial industry. The failures also highlight the importance of diversification and risk mitigation strategies for banks and their clients. As the financial industry continues to evolve, it is essential that institutions keep pace with the changes and adapt their practices to ensure their stability and resilience in the face of future challenges. _______________________ 📢Follow us here on TradingView for daily updates and trade ideas on crypto , stocks and commodities 💎Hit like & Follow 👍 We thank you for your support ! CryptoCheck
SShort
by CryptoCheck-
12
Stablecoins Depeg: Twist of Events, Banking CrisisHi Traders, Investors and Speculators of the Charts 📈📉 Ev here. Been trading crypto since 2017 and later got into stocks. I have 3 board exams on financial markets and studied economics from a top tier university for a year. In a twist of events, an incident that happened within the banking realm created chaos for the crypto realm. I bet you didn't have that on your bingo cards for 2023... In the past few weeks, there have been two significant bank failures in the United States that have sent shockwaves throughout the financial world. The collapse of Silicon Valley Bank and Silvergate Bank has sparked concerns about the stability of the banking system and the future of the crypto industry. The failure of these banks highlights the fragility of the financial system and the challenges faced by institutions that operate in high-risk sectors like tech and crypto. Silicon Valley Bank (SVB) was closed by the FDIC on March 9 due to its heavy losses caused by the downturn in technology stocks and the U.S. Federal Reserve's aggressive plan to increase interest rates. The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by the US Congress in 1933 to maintain stability and public confidence in the nation's financial system. The FDIC provides deposit insurance that guarantees the safety of deposits in member banks, up to a certain limit. In the event that a member bank fails, the FDIC will step in to insure deposits, provide assistance to depositors, and liquidate the failed bank's assets. The FDIC also regulates and supervises member banks, as well as conducts research and analysis on the banking industry. Silicon Valley Bank bought bonds using customers' deposits, but the value of those investments fell as interest rates rose. This is usually not a problem for banks, but Silicon Valley Bank's customers were largely startups that needed cash. Venture capital funding was drying up, and companies were tapping their existing funds deposited with Silicon Valley Bank, which was at the center of the tech startup universe. In response to this liquidity crisis, SVB sold a $21bn bond portfolio at a loss of $1.8 billion . The bank attempted to fill the solvency hole with a combined equity offering of $2.25bn on March 8, but the attempt failed. This is the largest failure of a financial institution in the United States since Washington Mutual collapsed more than a decade ago. The closure of SVB had an immediate effect on some startups that had ties to the bank, as they scrambled to pay their workers and feared having to pause projects or lay off employees until they could access their funds. SVB, the 16th largest bank in the US, had assets of $209 billion, with more than 50% of its investments tied up in long-term securities, including exposure to the Silicon Valley tech and health startup world. The bank's sudden collapse has raised questions about its risk management practices, and the impact of its closure on its clients, who are largely startups and wealthy tech workers. The bank's large uninsured deposits and exposure to high-risk sectors like tech and crypto contributed to its downfall. But SVB isn't the only one... Silvergate Bank, which has been a significant player in the crypto world, has announced that it is closing and returning deposits. The bank's holding company, Silvergate Capital Corporation, stated that the decision was made "in light of recent industry and regulatory developments." The closure follows the loss of one billion dollars in a quarter after customers withdrew $8.1 billion, and a subsequent filing in March revealing even worse financials. The closure of Silvergate Bank is concerning for the crypto industry, as it may lead to companies turning to less regulated institutions for their banking needs, potentially making the space even riskier. Coinbase, Crypto.com, and Paxos have already started moving away from the bank. The collapse of the bank will likely draw scrutiny from lawmakers who are concerned about the crypto contagion affecting the traditional financial sector. The Silvergate Exchange Network, which allowed crypto exchanges like Coinbase, Gemini, and Kraken to move money between themselves and other institutions, has also been shut down. The bank's financial struggles have been ongoing for some time, with some of its high-profile clients like FTX and Genesis also experiencing challenges. Silvergate's collapse raises concerns about the future of the crypto industry, as companies may turn to less regulated institutions for their banking needs, potentially making the space even riskier for everyone involved. The bank's failure is also likely to draw scrutiny from lawmakers concerned about the potential contagion of the crypto industry on the traditional financial sector. Late Friday night Coinbase, a popular cryptocurrency exchange, announced that it would suspend conversions for the USDC stablecoin. This led to a rush of people trying to sell their USDC holdings, causing it to depeg from its value of $1 and trade as low as $0.87 before recovering to $0.92. Another stablecoin, Dai, also depegged and experienced a high volume of trading. Stablecoins are important in the cryptocurrency market as they provide a way for traders to move funds between different exchanges or cryptocurrencies without having to convert back to fiat currency. They are also used as a store of value by some cryptocurrency investors who prefer a more stable asset compared to the volatility of Bitcoin or other cryptocurrencies. If stablecoins depeg permanently, it could lead to a loss of confidence in their stability and reliability. This could potentially cause a sell-off of stablecoins and a shift towards other assets perceived as more stable, such as traditional fiat currencies. But before we panic too hard and FUD out, it's important to note that the impact of this crisis on cryptocurrencies such as alts and Bitcoin would depend on the severity and duration of the stablecoin depegging event, as well as other market factors such as investor sentiment and regulatory actions. In the past, there have been instances of stablecoins temporarily depegging from their underlying assets without significant impact on the broader cryptocurrency market. One notable example of a stablecoin depegging in the past is the case of Tether (USDT) in 2018. Tether is a stablecoin that is pegged to the value of the US dollar, with each USDT token representing one US dollar. In October 2018, Tether's price dropped below the $1 peg on several cryptocurrency exchanges, leading to concerns about the stability of the stablecoin. The depegging was attributed to a variety of factors, including regulatory pressures, concerns about Tether's reserves, and a general market downturn. The depegging led to a sell-off of Tether and a shift towards other stablecoins such as USD Coin (USDC) and TrueUSD (TUSD), which saw increased demand as traders and investors sought more reliable alternatives. Despite the depegging of Tether, the broader cryptocurrency market did not experience a significant impact, with Bitcoin and other cryptocurrencies largely unaffected. However, the incident highlighted the potential risks and uncertainties associated with stablecoins and their reliance on centralized institutions to maintain their pegs. In terms of price action for the immediate term, the Tether (USDT) depegging event in 2018 did have some impact on the cryptocurrency market prices, although the impact was relatively limited and short-lived. Following the depegging of USDT, there was a brief sell-off of Tether and a shift towards other stablecoins such as USD Coin (USDC) and TrueUSD (TUSD). This led to increased demand for these stablecoins, which helped to maintain their pegs to the US dollar. However, the broader cryptocurrency market, including Bitcoin, was largely unaffected by the Tether depegging. While there was some initial volatility and uncertainty, the market quickly stabilized and resumed its upward trend. 💭The collapse of Silicon Valley Bank is the second-largest bank default in U.S. history and puts the golden trifecta rule of banking (liquidity, solvency, and profitability) into review. This failure reminds us of the unintended consequences of unorthodox monetary policies, pandemic remediation measures, excessive leverage, and democracy eroding rulings. SVB had significant exposure to long-term securities and the Silicon Valley tech and health startup world. The bank's uninsured deposits pose a problem but insured deposits will be available as soon as Monday. The collapse of Silicon Valley Bank and Silvergate Bank underscores the need for stricter regulatory frameworks and tighter risk management practices in the financial industry. The failures also highlight the importance of diversification and risk mitigation strategies for banks and their clients. As the financial industry continues to evolve, it is essential that institutions keep pace with the changes and adapt their practices to ensure their stability and resilience in the face of future challenges. _______________________ 📢Follow us here on TradingView for daily updates and trade ideas on crypto , stocks and commodities 💎Hit like & Follow 👍 We thank you for your support ! CryptoCheck
G
by CryptoCheck-
28
Is it still viable to go long on gold? Amidst the significant decrease in non-farm payrolls, the rise in unemployment rate, and the impact of SVB's bankruptcy, risk aversion has surged, with gold returning to near 1900. The occurrences have made the release of February's non-farm payroll data seem like a joke! With so much news to back it up, even technical analysis will become powerless. For now, until there is a complete solution to the SVB bankruptcy event, gold will remain beloved by safe-haven funds, and the price of gold will continue to rise. During trading, attention should be paid to the resistance level of 1900, while the support of today's gap at the 1867-1863 range below should be considered. If the gold price falls below 1863, it indicates a sign of a decrease in risk aversion, and the gold price will return to a range of fluctuation between 1833-1890. Hawk-eyed trading strategy: Go long around 1867 with a take-profit target of 1890-1899. Follow me and you'll get more interesting investment information! Plus, I'll share real-time trading strategies during trading hours, including stocks, gold , crude oil , forex, cryptocurrencies, and more!
FOREXCOM:XAUUSDLong
by EagleEyeStrategy
DXY is now Risk On scenario now as banking sector gets crushed!Sharks are smelling blood in the banking sector and they are loading up to strike. Last week, we saw Silvergate Bank collapse and shortly after that, Silicon Valley bank (SVB). Within 48 hours, 2 moderate size regional banks went under. Last Friday, several banks tanked at least 20% and few were halted due to massive shorting. The house of cards are falling and this situation looks like a Lehman Brother's. Contagion will spread to vulnerable sectors such as housing and auto. Jerome Powell wants to further increase interest rates, which will cause more destruction. Investors will be spooked and wanting to pull their money out of Dollar debt system and investments. 2 year US Treasury Bond yields dropped off the sky. With US national debt being so incredibly high at $32 Trillion and counting, US Treasuries are also no longer safe havens. Gold and Crypto perhaps? DXY just broke new lows on Daily timeframe. The bear market rally is over I believe and with the catalyst of collapsing banking sector with its contagion expectations into other sectors, DXY is Risk On now, which is Bearish. By Sifu Steve @ XeroAcademy
TVC:US02Y
by XeroAcademy
A traders' week ahead playbook - the Fed bring out the big gunsWe start the week on a positive note but with such event risk in front of us volatility remains something that traders need to adjust too and respect. After spending most of the weekend debating who was to blame for SVB Financials demise and who was next in the firing line, we’ve seen the Fed uniting with the US Treasury and the FDIC to bring out the big guns - all strategically timed for the futures open – we’ve seen that Signature Bank has also failed, but in both cases depositors are fully covered and will have access to all deposited capital – this removes a major source of contagion risk and depositors across regional and smaller banks know categorically that the Fed won’t make you wear a haircut and have your back. We’ve seen a suite of other facilities announced aimed at addressing liquidity and funding concerns – notably, banks can access term funding using collateral valued at par – this is a big deal for banks and a clear positive given collateral used for funding was valued at a discount in the current rate cycle – so funding assets, especially for the more destressed financial institutions is now cheaper. The Fed are not only addressing concerns over the bank’s asset side of the balance sheet but on the liability side, where they are essentially stepping in front of a larger bank run, which as we’ve seen once again can be devastatingly swift to bring down any institution. The Treasury has been keen to highlight that SVB Financial, which primarily failed to hedge its interest rate exposure, is not being bailed out and it’s the depositors that are their sole focus - the Fed are essentially the lender of last resort. Still, there's likely going to be further migrations to the stronger banks and those with a large asset base and low equity will continue to see depositors divest capital. The reaction in markets has so far been positive with the USD following a further rally in the US 2yr Treasury, with yields -11bp on the day. The market now prices ‘just’ 27bp at the 22 March FOMC meeting – we see 61bp of hikes now priced through mid-2023, down from over 100bp last week. Certainly, the data over the past five days is a tailwind to lower interest rate expectations. Clearly, the deterioration in the asset quality held on bank’s balance sheet - much of which is not marked-to-market to show the impact of unrealised losses - is a major consideration. The USD is lower vs all major currencies, notably vs the MXN and AUD, where the additional headwind of US equity futures gaining 1.3% is weighing as relief comes into the market. We should see low volatility priced in the VIX index. One questions how long this goodwill lasts and while the troika of US institutions provides a backstop, it's still concerning that we’re in this position - what other black swans could come as a result of the rapid shift in interest rates? The price action in the KRE ETF (S&P Regional Bank ETF) could offer broader market direction, while we watch the extent of relief seen in single stock names such as First Republic and Charles Schwab (Pepperstone clients can trade these on MT5) – but also in USD funding and other risk metrics, such as the difference between secured and non-secured funding. Looking ahead and sentiment in markets and the subsequent price action will most likely be affected by the US CPI print. This is key now and the marquee known event risk that could really move markets around. Naturally given the recent repricing lower in rates expectations it suggests a core CPI print below 0.3% MoM could get the risk party really started. Conversely, above 0.5% MoM could see the market really open the door to a 50bp hike again – the higher the outcome obviously the bigger the rally in the USD and drawdown in equity markets. The market is seeing a higher probability of an above consensus CPI print, but I think we get a more pronounced move in markets on a lower print than the move we could see on a higher outcome – especially if core services ex-housing was to come in weaker. I guess we’ll never know though. We will also see US retail sales and PPI, and both could impact given the hotter prints we saw last month. Aussie and UK jobs and the ECB meeting will also get close attention from traders. It's another huge week in the markets – we could be staring at a big rally in risky assets if inflation comes in soft and we see a sustained rally in financials – where the markets increase conviction that the Fed are close to a pause. Conversely, one can make a compelling counterargument to that, based on an alternate set of outcomes. The fact remains traders need to consider their leverage, and position size and be agile to change – we react, we cut losers without emotion and move on, and we respect but harness the volatility.
PEPPERSTONE:USDX
by Pepperstone
What impact will there be after bankruptcy for SVB? The main reason for SVB's problem this time is liquidity. The banking industry is different from other industries, where the importance of liquidity is far greater than profitability. In the past few decades, there have been too many banks that have experienced extreme risks due to liquidity issues, and SVB has fallen into the same trap. The management was aware of the bankruptcy, as the CEO cashed out $3.6 million in stocks two weeks before disclosing the losses. The exaggeration was that a few hours before the announcement of bankruptcy, the company still distributed bonuses for 2022 to its employees. It is a stark contrast between those who received the bonus and thinking about how to spend it, and those who cannot withdraw their deposits and are worried about the situation. The market is concerned about the possibility of systemic risk and a Lehman-like crisis. As discussed earlier, based on the data, the liquidity risk of large banks is manageable, and the Federal Reserve is providing a backstop. However, there are around 5,000 banks in the United States, and more than just SVB may face liquidity risks in a high-interest rate environment. (Based on the data, there is a significant amount of unrealized losses for the four largest banks in the United States. The risk depends on the ratio of "hold-to-maturity investments/total liabilities." The ratios for the four banks are 22%, 12%, 12%, and 17%, while SVB's ratio is as high as 47%. Overall, the risk appears manageable.) The bankruptcy of SVB has the deepest impact on technology companies, as Silicon Valley Bank was set up to provide financing to technology companies, so many technology companies also keep their cash in SVB. Many companies have already disclosed the amount of their deposits in SVB over the weekend, and the impact on the technology industry is indeed significant. In theory, the money in SVB is safe because the asset problem is not significant, but due to the mismatch of terms, it takes six months or even a year to pay, which is a huge pressure for some technology startups. Those who have started a business know that every day they wake up, they have to pay rent and salaries, and liquidity is the core support for company operations. Hedge funds in the United States have already begun to look for opportunities to enter this time-limited money-making opportunity. Today, a hedge fund proposed to buy the startup company's deposits in SVB at a price as low as 60% of face value. It is indeed taking advantage of the situation to buy at this price, and if the asset confirmation is no problem, the portion due in a year, which is a 5% discount rate, is highly likely to be recovered by more than 90%. The bankruptcy of SVB has had a significant impact on financial assets, and the US stock market has fallen for two consecutive days mostly because of this. The US bond yield has also fallen for two consecutive days, and the flight to safety sentiment is beginning to spread. In the final analysis, the reason for SVB's bankruptcy this time is the Federal Reserve's rapid rate hike. Many contradictions will be highlighted in a high-interest-rate environment. The United States may still be relatively stable, and the greatest volatility may be in Europe and emerging markets. The follow-up is to pay attention to whether there will be further impacts and the Federal Reserve's further actions. The Federal Reserve has confirmed that it will hold an emergency closed meeting of the Federal Reserve System Board of Directors at 11:30 am local time on Monday, and we await the outcome of the meeting. Follow me and you'll get more interesting investment information! Plus, I'll share real-time trading strategies during trading hours, including stocks, gold , crude oil , forex, cryptocurrencies, and more!
S
by EagleEyeStrategy
After the collapse of SVB Silicon Valley Bank... The sequence of events leading up to the collapse of SVB Silicon Valley Bank is as follows: SVB Silicon Valley Bank was one of the top 20 banks in the United States, with over 40 years of operation and total assets of $211.8 billion as of the end of 2022. As its name suggests, the bank primarily served technology startups and employees of large companies in Silicon Valley, and was the bank with the most deposits in the area. On Thursday, March 9th, SVB Silicon Valley Bank announced a liquidity crisis. The stock price of its parent company, SVB Financial Group, plummeted by 60%, causing a sell-off in bank stocks and a simultaneous decline in the three major U.S. stock indices. As news of the crisis spread, more and more institutional and high-net-worth clients rushed to withdraw their funds, causing a bank run that fueled panic and accelerated the bank's bankruptcy process. In short, the bank's collapse was due to a combination of factors: taking in deposits at low interest rates, investing heavily in mortgage-backed securities (MBS), facing short-term liquidity constraints, selling MBS at a loss to stop the bleeding, and triggering a panic. The SVB Silicon Valley Bank incident is directly related to the Federal Reserve's monetary policy and bank liquidity management. In response to the global pandemic in 2020, the Fed implemented unlimited quantitative easing (QE) and lowered interest rates to near 0%. Over the next two years, U.S. tech companies initiated a wave of share buybacks, and businesses took advantage of the low interest rates to raise large amounts of capital, which SVB absorbed in the form of deposits. The bank used a significant portion of these deposits to engage in relative value trades, primarily in various types of U.S. bonds. More than 65% of SVB's deposits were invested in MBS, which was normally a safe practice as long as the securities were held until maturity. However, the problem arose when SVB over-invested in MBS and the Fed began to shift towards raising interest rates. The Fed's aggressive interest rate hikes drastically changed the macroeconomic environment, pushing rates higher. Startups in Silicon Valley were no longer able to spend as lavishly, and there were more layoffs and closures. As interest rates rose, the interest paid to depositors also increased, putting pressure on the bank's short-term liquidity. SVB had to sell its MBS holdings to raise cash, but by this time, market rates had risen from 0% to nearly 5% for two-year yields, causing the value of assets to plummet. SVB sold $21 billion worth of assets at a loss of $1.8 billion. While SVB could have absorbed the loss of $1.8 billion, the bank still held more than $1 trillion in MBS, and a run on these securities could result in a loss of $15 billion, making SVB insolvent. Investors panicked in anticipation of this scenario. Event impact 1.SVB announces bankruptcy without warning. After panic spread, Silicon Valley Bank experienced a run on withdrawals of $420, causing an immediate liquidity crisis. The stock price of SVB Financial Group plummeted by 60% in a single day, crushing the management team's plan to sell stocks to save the company. The management team lost confidence and declared bankruptcy. Its stock price fell from $700 to $100 in just one year. 2.Chain reaction in stock and cryptocurrency markets. Investors fear that other banks may also be suffering from the negative impact of the Federal Reserve's aggressive interest rate hikes and high rates, similar to the SVB Silicon Valley Bank incident. The negative sentiment has spread to the US banking industry, which is a core asset of the US stock market. The sell-off of bank stocks is a drag on the US stock market as a whole. At the same time, concerns about financing and liquidity for large tech companies have surfaced. This event also affected the cryptocurrency market. It is difficult to say that there is no relationship between SVB Silicon Valley Bank and the cryptocurrency industry. Circle, the issuer of the stablecoin USDC, has announced that $3.3 billion in cash is deposited in Silicon Valley Bank, which accounts for approximately 8% of the USDC's $40 billion scale. For cryptocurrency companies that have not yet made an announcement, when will they collapse? Market reaction Currently, the SVB Silicon Valley Bank incident has mainly affected the US stock and cryptocurrency markets, with negative market sentiment. The general decline in US bank stocks dragged down the three major US stock indices, with particular attention paid to the Dow Jones Industrial Average. The Dow Jones has been in a four-month consolidation phase in the 32,500-34,500 range, with a possible "double top" formation. This event has become the most critical factor in the Dow Jones' downward breakthrough. "The longer the accumulation, the faster the release." Going forward, attention should be paid to the Dow Jones' oscillating downward trend, with a target pointing towards the key level of 30,000. Bitcoin prices fell below support at 22,000, but have since returned to above 20,000. In the short term, it is still necessary to closely monitor this support level. If the support is confirmed to be effective, the target will be 22,000. If the 20,000 support line is breached, it will return to a weak consolidation below 20,000, marking the end of the token's rebound. There is a possibility of further breaking through the new low of 18,000. As the largest bankruptcy case in the US financial industry since the 2008 financial crisis, this event is not yet sufficient to cause systemic risk in the US financial industry, but local risk developments need to be monitored. BITSTAMP:BTCUSD BINANCE:BTCUSDTPERP TVC:DJI
Short
by Ice_and_Fire1
1
SVB: Announces bankruptcy! The situation at Silicon Valley Bank (SVB) is not particularly complicated. In short, they borrowed short and invested long, mismanaged their liquidity, and caused their own demise. The specific steps were as follows: low-interest deposit-taking, overzealous investment in Mortgage-Backed Securities (MBS), short-term liquidity gaps, forced selling of assets, and market panic. Low-interest deposit-taking: Between 2020 and 2021, due to the Federal Reserve's extended period of 0% interest rates, there was a huge financing boom in the tech industry, with a significant portion of cash flowing into SVB. SVB's deposit liabilities surged from $61.8 billion at the end of 2019 to $189.2 billion at the end of 2021, with interest rates on this portion of deposits only around 0.25%. Overzealous investment in MBS: With so much low-interest money, SVB naturally engaged in carry trade. Typically, banks focus on lending, but SVB invested a large portion of its funds in MBS. Their financial statements showed they held $13.8 billion of MBS at the end of 2019, which had grown to $98.2 billion by the end of 2021. In other words, over 65% of the deposits they took in went towards buying MBS. Short-term liquidity gap: Normally, investing in MBS is not a problem because they can be redeemed at maturity. But SVB's problem was that it held too many MBS and had too few short-term liquid assets. In today's high-interest rate environment, tech companies are struggling to survive and are gradually withdrawing money from their deposits, causing SVB's liquidity pressures to soar. Forced selling of assets: To solve the liquidity problem, management chose the cheapest option, which was to sell their MBS holdings. But now, market interest rates had increased from nearly 0 to 5% for 2-year Treasury bonds, and asset prices had fallen significantly in sync. Selling $21 billion of assets resulted in an $1.8 billion loss. Market panic: For SVB, the $1.8 billion loss was still manageable because their shareholder equity was $16 billion. However, the problem was with the $100 billion of MBS that they had not yet sold. If there was a run on the bank, this could result in a potential loss of $15 billion, causing SVB to go bankrupt. Therefore, there was a great deal of panic in the market, causing the stock price to plummet by 60% in a single day. SVB has now declared bankruptcy, and the US government has intervened. It is being managed by a specialized institution. When a bank of this size collapses, there are bound to be chain reactions. The institutions known to be affected include Circle. For those who invest in stocks, they may not have heard of it, but those who invest in cryptocurrencies certainly have, as the most famous stablecoin, USDC, is issued by Circle. The total amount is $40 billion, and in today's announcement, they revealed that $3.3 billion of their assets were stuck in SVB, accounting for almost 8%. This means that those who invest in cryptocurrencies suddenly find that their $100 has shrunk to $92. To say that it's a seismic event is not an exaggeration. There are likely dozens of institutions of a similar scale to Circle that are also trapped, but for various reasons, they are not disclosing their situation. We'll have to wait and see when they come forward. Follow me and you'll get more interesting investment information! Plus, I'll share real-time trading strategies during trading hours, including stocks, gold, crude oil, forex, cryptocurrencies, and more!
Editors' picks
S
by EagleEyeStrategy
22
You decide - SVB Financial collapse - who is to blame?A lot of talk on who is to blame for the SVB Financial collapse – this is the first big casualty of rapid rate hikes and tighter policy, but who is to blame and what are the next steps? -SVBs management – they invested short-term deposits in longer term fixed income assets – where a large % of its $120b securities portfolio lacked any kind of interest rate hedge (payers swaps were clearly needed) -SVBs management – In the past 8 months SVB had no risk manager - fortune.com - no one knows how they efficiently managed risk -SVBs management – the accounts showed they held $91b of its $120b securities in its HTM (assets Held to Maturity) book – these are assets they intend to hold until maturity but the accounting rules detail, that they don’t need to mark-to-market the moves in the underlying and report the ballooning losses – which again were not hedged. -SVB deposit mix - 93%+ were above the FDIC insurance limit – this makes depositors v sensitive to any capital concerns at the bank -SVB deposit mix - VCs had a rapid cash burn, as projects they back are typically driven by changes in interest rates (think Net Present value and Internal rates of return) – depositors took cash off SVB’s balance sheet to fund operations – SVB subsequently had to sell assets as their liabilities fell – we then see realised losses from buying securities at much higher prices. -Short sellers/investor base – shorts had an eye on unrealised losses from the worsening asset quality for weeks – the selling accelerated when the CEO/CFO/CMO disclosed they’d sold a chunk of stock on 27 March – it was over when the SVB took a $1.8b hit on its AFS securities available for sale on Wednesday – management sold $21b of its $28b book and announced a $2.25b in equity/debt raising - investors knew with conviction that depositors were fleeing – who supports a raising when liabilities are falling – no one sensible, raising pulled -The Fed - failing to know such a shift in rates would impact banks asset quality when its primary function is financial stability. -Regulation - Basel 3 - banks being forced to buy govt paper against deposits - v low risk weighting (perhaps required a hedge Hard to pinpoint this on one aspect IMO - I think there is a perfect storm going on – a lack of hedging of interest rate risk was clearly a dominant factor behind this. Top down this is a function of rapidly tightening monetary policy and the impact this had on both the asset quality and liability side of the balance sheet – we should recall SVBs model is not the same as others in the banking space, so its hard to say this is systemic – still we wait for the outcome on next steps on how deposits over $250k will be dealt with – we’re hearing they may get 50% back initially but a buyer would be the best solution The issue for regional/smaller banks comes if is we see some sort of haircut on the deposits claim over $250k – that could see a loss of confidence in holding deposits with other smaller banks names – we shall hear more soon, but broad contagion through the financial system seems unlikely, but it is a possibility given nearly 1/3 deposits in the banking system are uninsured – any bank with a large asset base and low equity are in the spotlight As said Friday this could be a nothing burger or have real impactions on economics - the big issue happens this week if we see no clarity on how depositors are dealt (seems unlikely) with and we get a hot CPI print
Editors' picks
AMEX:KRE
by Pepperstone
31