Impact of Silicon Valley Bank’s fall onto the Crypto Industry
A few days back, the US banking sector was surprised when it acknowledged the fact that Silicon Valley Bank was going to collapse.
It was on 10th March 2023 when Silicon Valley Bank (SVB) announced its failure to carry on the banking business any longer.
SVB was a major bank in the US banking sector that held 16th position amongst the biggest financial institutions in the country.
It was founded by SVB Financial Group and came into being 39 years ago in 1983 but now SVB is no more.
In fact, a lawsuit has been filed by the bank’s shareholders against the top management of SVB Financial Group i.e. the group which owned SVB.
Back-to-back, in less than a week, three major banks of the world namely Signature Bank, Silvergate Bank, and SVB have collapsed.
There is an ongoing debate that the conventional banking system is no more efficient and reliant than it used to be.
A group of people is arguing that the failure of the banking system calls for crypto adoption. The group is suggesting that circumstances are such that they would likely end the ‘prolonged crypto winter season’.
Public Predictions With Regard To US Federal Reserve Reaction
Amongst the crypto community, people have started to make their predictions with regard to future policies to be issued by Federal Reserve.
They have been suggesting that after acknowledging that the banking system is flawed, Federal Reserve would refrain from issuing harsh policies.
They have been arguing that the existing banking system is not equipped to deal with the ongoing financial crisis. Consequently, the situation warrants moving on to the alternates such as cryptocurrencies.
In case the Federal Reserve decides to go soft in the future, it would hence boost the global crypto economy significantly.
Otherwise, the harsh policies were curtailing, and in fact hammering, the growth and expansion of cryptocurrencies.
Crypto Industry’s Response to the Collapse of Various Banks
When the digital asset market acknowledged the fact of several banks’ collapse, it immediately started to see the economy surging exponentially.
Resultantly, Bitcoin and Ethereum quickly rebounded back in recapturing their lost gains.
Similarly, the stablecoin economy also took benefit of the sudden market change which derived impetus from the collapse of major financial institutions.
Exactly on Monday, the crypto market responded positively to the rumors of the Federal Reserve reducing the rates for the future.
Immediately thereafter, Bitcoin saw its value surge by at least 13.5% which took the value above $24,000. Similarly, Ethereum’s gains were reported to be about 8.1% which increased its value to $1,680.
It is said that SVB’s failure was the final stress call indicated by Janet Yellen, Treasury Secretary of the US, a few months ago.
However, the Fed. Reserve failed in acknowledging the potential of the stress signal indicated by Yellen.
It is also said that it was this stress call that would ultimately force Fed. Reserve to reduce the rates significantly in the future.
Possibility of Seeing the End of Crypto Winter Season
The crypto community is hoping that a sense of distrust is developing regarding the banking system. They are taking it as a sign of hope which, according to them, has the potential of ending the crypto winter season.
However, it cannot be said with certainty that the season may end given the circumstances.
As a matter of fact, even the crypto industry is facing several challenges which could also lead to the collapse of the industry’s giants.
For instance, a lawsuit brought up by New York’s Attorney General alleges Ethereum to be a ‘security’.
If the lawsuit succeeds, then it would be no less than a massive earthquake having the potential of swallowing the entire crypto industry.
Apart from that a similar suit is also pending disposal which has been filed by SEC against globally popular crypto, XRP.
On the other hand, the crypto industry is also comprised of several projects which are nearing their collapse.
Already, FTX and Terra Luna have collapsed whose impacts are not likely to end at least in the next five years.
