Are we heading to a bank crisis in the US?

The fall of the Silicon Valley Bank came as a surprise to many. The Silicon Valley Bank is a 40-year-old bank in California that most venture-backed startups use. At its insolvency, it had about $209 billion in assets and was the 16th largest bank in the United States.

SVB is strong in the startup scene, and there are claims that it banked at least half of the US’s venture-backed startups.

They lured startups by offering attractive loans in return for these startups, using them as an exclusive bank. They had strong relationships with founders and VCs and offered them incentives such as attractive mortgage deals.

As is the policy, every bank must be insured. SVB was FDIC insured, but FDIC insurance only protects accounts that hold up to $250K. This did not work well for SVB as over 85% of the accounts had over $250K.

SVB faced massive growth as there was a spike in the number of deposits from 61 billion at the end of 2019 to 189 billion at the end of 2021. The increase in liquidity is due to fundraising avenues and different activities such as IPOs, venture capital investments, acquisitions, etc. That means SVB had many assets they needed to generate a return on. To generate a return while still investing in relatively safe assets, they decided to buy longer-dated securities such as treasury bonds and mortgage-backed securities. Unfortunately, this buying took place when rates were near record lows. By the end of 2022, SVB had over $120 billion in these securities versus only $74 billion in loans.

When the FED increased interest rates, it affected the VC landscape last year. There was less funding going to startups as the VC’s found it better to invest in bonds and government securities. This made deposits going to SVB decrease. This began a crisis as SVB had invested in long-term assets. SVB did not have interest rate hedges or proper risk management. Losses started piling up, and at the end of 2022, SVB had marked market losses on those securities over $15 billion, almost equivalent to its entire equity base of $16.2B. That means that if depositors want their money back, they will not have money.

They decided to compensate by making a share sale. When the news of the share sale went out, the stocks plunged. VCs then advised their companies to withdraw their funds from SVB. The startups and founders were in a scramble to withdraw funds.

Effect on Crypto

SVB collapse impacted Circle as Circle used them to bank the USDC stablecoin. UDSC is a fiat-backed stablecoin with an equivalent to the dollar. There were fears that it would fall off the hook. Circle announced that it has 3 billion out of its 40 billion reserves, about 8% of the amount.

A bank run?

There were fears that the SVB situation would lead to a bank run, as many banks have similar structures. There are many losses from fixed-income securities, which would affect their liquidity. For fear of a bank run, many started pulling funds from their accounts as no one was sure how fragile the US banking system was. The FDIC covers only 1.3% of their deposits, while the banking system has a total of $22 trillion. That means there were high chances of a bank run.

There are up to 65000 startups affected by SVB. If they cannot access funds, it may halt their operations, such as payrolls, making employees quit.

Unfortunately, bank runs do not discriminate on who the account holders are, and it may affect up to regional banks.

Increased interest rates have affected liquidity, leading to losses in bank balance sheets.

What does the future hold?

To rescue the situation, the FDIC and FED revealed working on a fund that will backstop deposits. The treasury Federal Reserve and the FDIC announced that they would be backstopping all the deposits at SVB so that customers could access their funds. This restored banking confidence and also helped Circle to recover. That was a brilliant move by the US government as there would be a wide-scale banking crisis.

The SVB crisis indicates that the fractional Reserve banking system is structurally unstable.

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Recession, Inflation, and Geopolitical risk: Key concerns for investors in 2023

JP Morgan’s 835 institutional clients participated in an e-trading survey. The survey was directed to those who use their e-trading services. This is the seventh year conducting the survey, and the clients were sampled from over 60 locations.

They discussed different issues that affect the investment space. They discussed issues such as AI vs blockchain, inflation vs recession, war, pandemic, etc. The survey is a great way to get institutional investors’ insights and the risks they foresee in the market.

Which developments the traders think are likely to shape the markets in 2023?

From the survey, the biggest concern is a recession at 30% of the respondents. 26% of the respondents said their biggest concern is inflation.19% mentioned geopolitical conflict, 14% said market and economy dislocation, 9% said government policy change while 1% of the respondents mentioned ESG/climate risk factors. Interestingly, no one mentioned the global pandemic as a source of concern.

The results are different from the ones last year. In 2022, inflation topped the list at 48%, then 13% cited market and economy dislocation, 13% mentioned global pandemic, 5% recession and 3% ESG/climate risk factors. Last year, geopolitical conflict was not a concern.


China plans to open up its economy, which will impact the global market. China opening up translates to more demand for global commodities. This will affect inflation as there will be more inflation for products on demand and their derivatives worldwide.

There will be increased demand for travel by the Chinese. This means more inflation for travel.

China opening up and many other factors make recession a big risk this year. A high recession will mean more damage to the economy.

Geopolitical conflict

Geopolitical conflict is a higher risk than last year. The war against Russi and Ukraine has been a big contributor. There are also cold war tensions between China and the US.

The dislocation between the market and the economy

There could be a situation in which stocks, bonds or crypto prices are likely not to reflect what is happening in the broader economy. Although the economic conditions seem to worsen, pricing does not reflect that. This is a risk for investors when it comes to capital allocation.

Government policy change

It was not a concern last year. It may be caused by changes in the US around the control of the House of Representatives. More market-friendly measures could mean more of a boost for the markets. This is a risk as it may lead to more gridlock, e.g. the US debt ceiling clash. If the US did not agree, it would affect the global financial market.

ESG/Climate risk factors

Climate change is no longer a real concern for investors as they feel there are more pressing issues to address.


When investors were asked to compare inflation this year to last year, 44% of the investors said they see it going down this year, and 37% said it would level off. The different opinions were based on their location. Those in the UK and Europe have a different view on inflation than those in the US. The US believe inflation will come down this year.

Inflation expectations are important as the inflation data as the expectations can drive inflation higher.

What is the greatest daily trading challenge in 2023?

Investors believe that market volatility will be the biggest challenge to trading. From the survey, volatile markets were top at 46%, followed by liquidity availability at 22%, workflow efficiency at 9%, and others. The results differed from last year, as the biggest concern last year was the availability of liquidity.

Trading technology in 2023?

53% of traders believe AI/machine learning will be the most influential in trading in the next three years. This will be followed by API integration, blockchain and distributed ledger technology.

Top 3 Market structure concerns?

The main market structure concern is access to liquidity, followed by regulatory change and market fragmentation. Just like last year, access to liquidity was top of the list.

Trends in the electronic trading space or percentage of their trading volume will be through e-trading channels?

The respondents predict that crypto assets and digital coins will likely see the most growth in institutional electronic trading. These include API multi-dealer platforms and single-dealer platforms. This is significant as it shows that investors are increasingly moving their crypto trading activities to these more institutionalized Services.

Several large companies on Wall Street have started to open their e-trading technologies up for crypto-related trading, e.g. the Aladdin platform started offering Bitcoin Trading.

This will create more efficient and liquid markets, which helps to reduce volatility and improve price discovery. It is a positive force for institutional crypto adoption.

What describes your focus on crypto?

72% have no plans to trade crypto/digital coins, and 14% plan to start trading within five years. Only 8% were trading crypto/digital coins. It means less institutional money in the crypto space. Less activity may be due to regulatory scrutiny by the SEC.

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14 Big Ideas for 2023: Crypto is here to stay

Ark Invest is an investment management firm focused on innovative technologies and disruptive trends. In its 2023 report, Ark Invest outlines its views on the 14 sectors it believes will experience exponential growth in the coming years. The 14 big ideas, according to the report, are:

  1. Technological convergence

Multiple technologies interact with each other to bring exponential growth. The report states they are in five categories and will be worth $200 trillion by 2030. The tech that will converge are cryptocurrencies, artificial intelligence, genetic sequencing, robotics, and energy storage. The most significant part of those technologies is neural networks, also known as AI.

2. Artificial Intelligence/AI

This will increase productivity as workers rely on AI to help with repetitive tasks. Companies like Microsoft and Google could be big players in AI as they can access large amounts of data.

3. Digital consumers

People will spend more time online, assumingly consuming short-form content. Gaming will be more popular due to immersive gaming experiences. NFT will increase in popularity due to gaming.

4. Digital wallet

According to the report, 65% of the planet’s population will use digital wallets by 2030 compared to the 40% who use digital wallets today. The numbers started rising during the pandemic and are going up. Digital wallets enable direct payments by eliminating intermediaries. This will create high profits for digital wallet providers at the expense of traditional finance. Closed-loop transactions are already common in China and will be worldwide with time.

5. Public Blockchains/cryptocurrencies

The crypto Market has lost a significant percentage of its market cap due to calamities such as the collapse of FTX.

Three technological revolutions are driven by cryptocurrency; the money revolution, the financial revolution, and the internet revolution. The report predicts that the total market cap of cryptocurrency will be $25 trillion in 2030.

6. Bitcoin

The report’s authors predict that one BTC will be worth $1 million by 2030 if we go by the total crypto market cap predictions.

They also highlight that BTC’s fundamentals are better than ever, e.g., institutional investors’ adoption, etc.

7. Smart contracts

Smart contracts are the ideal alternative to all the centralized intermediaries in crypto that failed last year. It is hard for decentralization to work without smart contracts. Smart contracts act as a hedge in different activities such as DeFi, decentralized borrowing, lending, decentralized exchanges, etc.

8. Precision Therapies

Precision therapies are different as they are patient-centric and target the root cause of disease, not symptoms. This does not mean root causes like poor lifestyle but technologies like artificial intelligence, AI, DNA and RNA sequencing, CRISPR Gene editing, and laboratory automation. It involves giving recommendations that are specifically tailored to your genetics. The authors reveal that Gene editing is close to going mainstream.

9. Molecular cancer diagnostics

Early diagnosis means early treatment, which means a lower chance that people die from cancer.

Advances in molecular technology also mean you can test someone for cancer using non-invasive means. These advancements in testing will also make it easier to detect cancer recurrence. It could lead to 20% year-on-year profits for cancer-related Industries until 2030.

10. Electric Vehicles

The report suggests that supply constraints could make it hard for the EV market to grow beyond a certain point.

Global automakers have investment plans to introduce EVs. If petrol cars are outlawed, a disconnect in supply and demand could make the costs of producing Evs high.

So far, sales of EVS have been exponential compared to expectations.

11. Autonomous ride-hail or autonomous Transportation

In the report, statistics show that the cost of traveling one mile has stayed the same in 100 years when adjusted for inflation. The costs will finally come down with autonomous vehicles. It will be an excellent alternative for those who cannot afford EVs.

Autonomous taxis are already here, and their numbers are growing with time.

12. Autonomous Logistics

It means automated delivery. Drones and robots will increase in numbers making everything cheaper. Autonomous trucks will eventually become cheaper than trains for supply chain purposes.

13. Robotics and 3D printing

These industries could grow from 70 billion to over 9 trillion by 2030.

Amazon is leading when it comes to 3D printing. 3D printing will be used in every industry but is currently facing setbacks due to the cost of materials, a shortage of qualified personnel, and design issues.

14. Orbital Aerospace

It means all space-related technology. There are reusable rockets that will rapidly reduce space exploration costs, courtesy of companies like SpaceX.

Reusable rockets will also reduce the cost of sending satellites to space for global networks. The cost of space-based global networks will continue to fall, making the internet affordable for everyone. Reusable Rockets will make hypersonic flight more affordable.

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The Crypto Industry Under Siege: How the U.S. Authorities Are Declaring War on Cryptocurrencies

The U.S. authorities are at war against crypto, with the Securities and Exchange Commission (SEC) leading the charge

The two leading companies targeted are the Kraken exchange and Paxos.

Kraken and Paxos are two crypto companies that are among the oldest and most well-established in the industry and have also met all regulatory requirements.


This is a US-based exchange that has to comply with all manner of regulatory requirements. Kraken aimed to join Coinbase by going public last year but shelved its plans as the crypto market plunged.

Kraken meets all the regulatory requirements as it ensures transparency and security. It issued proof of reserves in 2014, submitted to a full audit last year, and it’s also never been successfully hacked. The IRS has just demanded it to handover data about its users.

The Exchange recently reached a settlement with the SEC to pay a 30 million dollar fine and shut down its crypto staking service for U.S. customers.

The SEC accused Kraken of failing to list crypto assets as securities. The regulatory body classifies proof of stake cryptos as securities. According to the SEC, Kraken did not disclose the risk they were getting into by staking to the public. Kraken was required to fill out a form that communicated the risks and rewards of staking to the public.

Kraken cleared the air by citing that unclear regulatory guidance from the SEC and others has made it impossible for US-based crypto companies to know what they can and can’t do. They were using the enforcement approach that is causing severe damage to the crypto industry in the United States.

According to Brian Armstrong, the CEO of Coinbase, enforcement regulation doesn’t work; it forces companies to go offshore, which is what happened with FTX.


Paxos may be less well known than Kraken, but it too has been around for a long time, having been founded in 2012. It has done all regulatory requirements to get licenses, which is why it works with big companies such as Mastercard, Binance, Paypal and Bank of America.

According to their website, their regulatory first approach is non-negotiable.

There were rumors that the New York State Department of Financial Services(NYDFS) was planning to hit Paxos, but the SEC had got in there first with a warning that it would take legal action.

Paxos now has 30 days to respond and persuade the SEC not to take matters any further.

The SEC is pursuing Paxos because of unregistered Securities, in this case, the BUSD stablecoin that Paxos issues on behalf of Binance. The Wall Street Journal classifies the BUSD as an unregistered security. The NYDFS have ordered Paxos to stop issuing BUSD.

This may be a move by the SEC to get Binance or a crackdown on stablecoins. If it is the latter, it means that Circle and Tether should brace themselves.

Paxos still has a chance to continue with its application with the National Trust banking Charter. The OCC regulates banking entities in the U.S.

There are fears that a concerted effort is underway by the current U.S. Administration to exclude the crypto industry from the banking sector.

What does that mean for the U.S. and crypto industry?

Even though the SEC’s jurisdiction may not stretch beyond U.S. borders, it will be a big blow to any crypto company, given the size and importance of the U.S. market.

It got a lot harder for U.S. crypto holders to participate in staking. As much as Coinbase still offers its staking services, there is a chance that the SEC will come after them too.

There will also be fewer crypto projects in the U.S. as many companies consider the U.S. crypto-unfriendly.

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