🏦 SVB collapses. Here's what's next 👀

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GM everyone. This is 2036, the crypto newsletter that pays you 💸

What a weekend. 

On Friday, a top US bank collapsed.

Thousands of startups were on the verge of being unable to make payroll, pay suppliers, or cover their debt in the next few weeks.

This was going to be exactly as bad as it sounds. But then - dun dun duuun - regulators stepped in.

This is a bigger deal than most of us think. Here’s what it means for crypto.

🤌 Our Top Picks

Stories to read if you’ve only got 1 minute (though today you should prolly read the whole thing)

1/ The Fed starts stealth QE

2/ Explaining the collapse of Silicon Valley Bank

3/ The Valley of Despair

💡 Learn

Get smarter on crypto in 2 minutes

Silicon Valley Bank (SVB) was a darling of the startup world. 50% of US tech startups held an account there.

As you can imagine, that’s a lotta moolah. Roblox, the game that keeps your nephew glued to his screen, held $150M there. Roku, the streaming device no one uses, had a cool $478 million. No small-boy stuff.

Over the last ten years, the startup scene exploded. So Silicon Valley Bank saw a huge influx of new deposits.

But a banco needs to make money. And they couldn't loan out these new deposits fast enough to get the ROI they needed.

So they took billions of $ of deposits and bought mortgage-backed securities.

These were 10+ year bonds with a 1.56% annual yield. In today’s world, that isn't much.

But when the FED started raising rates, these bonds tanked in value.

You don’t have to know all the technicalities, but in short - existing bonds tank when new, better ones come on the market, i.e. when interest rates rise. 

And because Jerome Powell’s been increasing rates for longer than it took me to watch season 9 of Friends - investors can now buy much sexier, less risky bonds from the government with over 2.5X the yield SVB was making.

SVB’s bonds tanked in value and the market got scared the bank was going insolvent.

Their stock price tanked 60% on Thursday. And then another 60% on Friday.

On Sunday, Janet Yellen announced Silicon Valley Bank shareholders would all get wiped out - nasty - but also that all depositors would be made whole - nice.

That’s good news for us in crypto, because hundreds of crypto companies were at risk of no longer accessing their money - like USDC, a top stablecoin, which broke its peg over the weekend.

So what happens next?

We’ve had Silvergate bank, Silicon Valley Bank and Signature bank all fail in the span of a week… moral of the story? Don’t name your bank starting with ‘Si’.

But there will likely be more banking failures in the coming weeks. US banks currently have over $620 billion of losses on their balance sheets.

That could get ugly. But it could also cause the Fed to stop raising interest rates - and even lower them again - both of which would be great for markets.

That’s why bitcoin is up over 10%.

So what does this mean for you?

If you already bank at a top 4 bank - JP Morgan, Citibank, Wells Fargo, and Bank of America - you’re probably safe.

You can breathe.

But a lot of regional banks are at risk of going bust. That doesn’t mean your funds will disappear. The Fed has announced all deposits at all banks are safe.

It just means that if your bank fails, it will likely be purchased by another or simply made whole. But don’t be shocked if you see it on the news.

If gambling on banks run by degenerates sounds like too much of a risk - you can try crypto.

Some Silicon Valley investors, like the honorable Naval Ravikant, suggested startups move part of their funds into bitcoin and ETH.

In fact, bitcoin could do well in all of this mess.

Bitcoin is a hedge against centralized institutions like the Federal Reserve that can move interest rates and forecasts at will although millions of businesses depend on them to make decisions.

That’s why King Balaji is calling Uncle Sam the new Sam Bankman-Fried.

Daring, but we like it.

For now, a crisis has been averted. We’re in the clear.

But the banking mess is far from over. 

We did, however, all learn a few lessons this weekend.

And that’s what we wanna share with you today.

💎 We wrote a report on the top buys, sells and holdings of crypto wallets worth between $1.5 and $32 million. Refer 1 friend to using this link and we’ll send over the report.

📝 Task

Earn $15 in BTC for lessons learned from SVB

Twitter was an interesting place this weekend.

Everyone was trying to find out who to blame (we found out - the Fed and the banks).

But only a handful of people were busy making sure that no matter what happens next, their money is safe enough that they can always fly to Punta Cana and drink two margaritas too many.

We’re in that camp, btw.

One of those was Anthony Pompliano.

Anthony is a pretty prominent bitcoin educator. He wrote a useful and actionable thread that’s worth digging into. Your task today will be to read and summarize what he wrote.

The best two submissions will receive $15 in BTC each.

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