Silicon Valley Bank collapsed in just 48 hours after revealing huge losses and a failed capital increase.

This was the largest bank failure since the 2008 financial crisis, and a huge short-term shock to the capital markets.

1, why Silicon Valley Bank has come to this point?

In 2019, the Federal Reserve began to implement monetary easing, and Silicon Valley Bank deposits all of a sudden skyrocketed from $61 billion in 2019 to $189 billion in 2021.

Silicon Valley banks use these deposits to buy up massive fixed-income portfolios in a frenzy to increase their investment returns, especially mortgage securities with maturities of 10 years or more.

In 2022, the Fed begins to raise interest rates rapidly, bond prices fall rapidly, and Silicon Valley Bank's portfolio holdings create a huge loss on the books.

Simply put, the Fed's monetary easing allowed Silicon Valley Bank's deposits to skyrocket.

And the Fed's rapid interest rate hikes led to huge losses and a liquidity crunch for Silicon Valley banks, which led to sudden death.

In fact, the root cause of two points, its first Fed policy, and the second is the Silicon Valley Bank's investment approach.

2. Will the event lead to the birth of a new round of financial crisis?

Because many investors think like this: the collapse of the Lehman Bank in 2008 was brewing for 3 months. And Silicon Valley Bank collapsed in just 48 hours.

Will the storm come harder this time?

Silicon Valley Bank failed because of a shortage of liquidity, while Lehman Bank failed because of a debt crisis.

The two are completely different in nature, and the difficulty of resolving them is not the same.

A liquidity shortage can be solved by replenishing liquidity in a timely manner.

The debt crisis, on the other hand, is so intertwined that it can easily lead to a chain reaction, thus triggering a financial crisis.

Silicon Valley Bank belongs to the former, that is, liquidity shortage, so the probability of triggering a financial crisis is not high.

Therefore, investors should not panic.

3. What will be the impact of this event on the major markets?

1) Impact on the U.S. tech startup industry.

Silicon Valley Bank is the largest bank in Silicon Valley, which has business dealings with a large portion of U.S. tech companies, and a large number of tech companies have deposits in Silicon Valley Bank.

Silicon Valley Bank was known as the heart of the U.S. tech industry, serving the important function of working capital for startups and investment funds.

Now, Silicon Valley Bank collapsed, the deposits can not be withdrawn, if not resolved in a timely manner, will lead to many startups can not pay wages or even closed down, which will cause a long trauma to the U.S. technology entrepreneurship.

2) Impact on small and medium-sized U.S. banks.

The problems that exist in the Silicon Valley Bank also exist to a greater or lesser extent in other banks in the United States.

Silicon Valley Bank is a star bank in the United States, and this incident will naturally trigger depositors' worries about other small and medium-sized banks.

If the government's bailout is not strong enough, it will lead to the spread of panic and intensify the worries of other small and medium-sized banks, which will form a chain reaction and lead to the bankruptcy of more small and medium-sized banks.

3) Impact on the Fed's rate hike process.

Silicon Valley Bank's collapse and the Federal Reserve's rapid interest rate hikes have an important correlation.

Silicon Valley Bank's collapse to the Federal Reserve to raise interest rates sounded an alarm: interest rate hikes are not no cost, and may at any time trigger serious consequences.

The Fed will be caught in an increasingly difficult situation.

If the interest rate hike is excessive, there is the possibility of bursting new financial risks at any time.

If the rate hike is not enough, high inflation is slow to fall, the economy can not enter a healthy state.

4) Impact on the dollar and foreign exchange markets.

With record inflation in the current cycle of rate hikes, the fact that this risk is now emerging in the financial system suggests that this approach is becoming increasingly counterproductive.

There is no doubt that the risks to the financial system are intensifying.

The collapse of Silicon Valley Bank underscores the longstanding concern that an aggressive series of rate hikes by the Federal Reserve Board will ultimately have an impact on the global financial system.

Risks have intensified and the creditworthiness of the United States dollar has been damaged, with a direct impact on the foreign exchange market.

The lessons of the gross miscalculation of the consequences of the 2007 subprime mortgage crisis in the United States should be heeded.

5) The Silicon Valley bank failure event is good for the cryptocurrency and precious metals markets.

The event will be an important test for the global financial system.

It is a serious negative for the stock market and the U.S. dollar, and a short-term positive for cryptocurrencies and precious metals.

Cryptocurrencies and gold have short-term upside expectations.

In comparison, the cryptocurrency market is the best market.

After this event, market expectations shifted and BTC turned around and then moved up.

It's because the cryptocurrency market is a very pure market, and policies have a relatively singular impact on the market.

As a result the trend is fluid and it is much less difficult to capitalize on opportunities.

Unlike other markets, where the influences are intricate and complex, it can be much more difficult to analyze and grasp.

Choosing a comfortable market makes trading much less difficult.

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