>>44856028>What's the QRD on SVB crashing?Here is the "long story short"
1) Up until 2020 Feds kept the interest rate very low
2) Venture capital could borrow money pretty much for free from government and, as long as they had 2% return on it, they would pretty much have infinite money (borrow at 0.75%, invest at 2%, PROFIT!) risk free
3) Venture capital took that money and made lots of long shot bets in startups, SPECIALLY in crypto and technology (including VShojo)
4) Most of that investment was in Silicon Valley and the bank both they and the startups used, Silicon Valley bank
5) With this MASSIVE inflow of deposits, the bank did what every bank does: reinvested the money because if they were paying zero interest in those deposites, even 1% would return a profit
And here is where things went sideways
6) Said bank invested in TEN YEARS BONDS at a certain rate (let's say, 1%). Usually that's risk free money because the US never defaults on those
7) Came 2020, the pandemics, inflation, the new government and the FED hiked the interest rate to (let's say) making a newly purchased bond to yield 2.5% on 10 years instead of one
8) Came 2023 and with lots of things going sideways for both tech and crypto (including that massive fraud scheme on FTX) the companies that deposited in that bank needed their cash on hand and quick. The bank, of course, had most of it tied in said 10 years bonds which the government would only pay for it in seven years
9) The bank tried to raise capital on the stock market. No deal.
10) The bank tried to find people to take said bonds out of their hands at face value. No deaç (they could buy the same bonds from the FED at 2.5% instead of theirs that would only get them 1%)
And then came the collapse
11) The bank had to sell their bonds AT A LOSS to get liquidity and honor the withdrawals. Word got on the market and people realized THEY NO LONGER HAD ALL OF THE DEPOSITED MONEY because they lost some with the haircut they took on the bond sales
12) Then people rushed to withdraw whatever money they had but, as mentioned, the bank didn't have so they just folded, called Uncle Sam and said "here is the bank, it's your problem now"
Here is where things get funny
13) FDIC only insures 250k out of the deposited money and this bank had accounts with BILLIONS from big clients INCLUDING CRYPTO FIRMS.
One of those crypto firms, on the other hand, held a HUGE part of the crypto world on their backs and, with their losses, lots of other crypto coins lost by proxy
All in all, it's a clusterfuck and if Uncle Sam doesn't bail them out (and they're not inclined) maybe even VShojo will end up having trouble, depending on which bank they used to hold those 11M investment
