• Silicon Valley Bank is facing huge liquidity issues due to U.S. interest rate hikes
• This poses a significant risk to the crypto industry, especially crypto-friendly venture capital firms
• Crypto VCs are already advising portfolio companies to withdraw funds from the troubled bank
Silicon Valley Bank’s Troubles
Silicon Valley Bank is a top 20 bank in the U.S. with $200 billion in assets under management (AUM). The bank, known for its dominance in the U.S. startup world, recently announced a $1.75 billion stock offering and a $500 million common stock purchase by private equity firm General Atlantic to shore up its balance sheet. As a result of this news, Silicon Valley Bank’s shares went down 60.41% on Thursday and 62% on Friday’s premarket session according to data from Yahoo! Finance, trading at $39.49 per share. Additionally, some users report not being able to log into their accounts at all as liquidity issues come into play for the bank.
Impact on Crypto Industry
The potential collapse of Silicon Valley Bank poses a significant risk to the crypto industry, especially those venture capital firms that are already crypto-friendly such as Sequoia and Andreessen Horowitz (a16z). In response, many VCs have already advised their portfolio companies to withdraw funds from the troubled bank before it gets worse.
Risk of Collapse
Of SIVB’s total assets of $200b , about $116 are securities while around $80b consist of high quality liquid assets that can be sold or repo’d for cash if needed . This shows how deep these liquidity issues go , making it increasingly risky if Silicon Valley Bank does not take necessary steps soon .
Why It Matters For Crypto
Crypto projects heavily rely on venture capital firms for funding and advice , so any disruption in this sector could lead to serious trouble for them . The absence of Silicon Valley Bank from this market would also mean fewer options for crypto firms looking for banking services .
What Can Be Done?
The best course of action would be for crypto-focused venture capitalists and startups alike to diversify their banking portfolios and find alternative ways of financing themselves outside of traditional banks like SIVB . This way they could protect themselves against potential risks associated with having most or all their operations tied up with one single financial institution .