Circle's cash reserve bank in crisis! Following Silvergate's closure, Silicon Valley Bank SVB reveals 1.8 billion baht loss, stock price plummets by 60%

On Wednesday, Silicon Valley Bank, the Silicon Valley Bank CEO announced a fundraising of $2.25 billion to offset the $1.8 billion loss from selling securities, causing the stock to plummet by 60%; SVB is also one of the reserve banks for the second largest stablecoin USDC. Another reserve bank, Silvergate, announced liquidation closure on the 9th due to the squeeze and selling of securities by crypto customers, resulting in losses. The overall cryptocurrency market is declining, with Bitcoin and Ether seeing a high daily drop of 7%.

Silicon Valley Bank Seeks $2.25 Billion Funding, Stock Price Plummets by 60%

On Wednesday, the CEO of Silicon Valley Bank (SVB) stated in an investor letter that SVB has sold all available-for-sale securities (AFS) and is seeking a more interest rate-sensitive, short-term, marketable securities investment portfolio.

He admitted that the one-time sale of approximately all marketable securities resulted in a pre-tax loss of up to $18 billion. Currently, they have started seeking $2.25 billion in funding, including a committed $500 million investment from General Atlantic. He mentioned that after transitioning the investment portfolio, there will be a net interest income (NII) of $450 million annually.

Following the announcement of Silvergate's closure yesterday, the stock price of SVB's parent company, SVB Financial Group (SIVB), plummeted by 60%, with a further 22% decline in after-hours trading:

According to a report by Bloomberg, sources revealed that Founders Fund, co-founded by Silicon Valley notable investor Peter Thiel, has advised its portfolio companies to withdraw their funds from SVB to avoid risks.

Following Silvergate, Another Circle Reserve Bank Faces Crisis

As of January 31, 2023, Circle's cash reserves were mostly in U.S. Treasury bonds, held at Bank of New York Mellon, Citizens Trust Bank, Customers Bank, New York Community Bank, Flagstar Bank, Signature Bank, Silicon Valley Bank, and Silvergate Bank. It shows that Circle continued to have funds deposited at Silvergate until the end of January, but all were withdrawn at the beginning of March. Related content: USDC issuer Circle withdraws all funds from Silvergate, undergoes first Deloitte audit.

Silicon Valley Bank, which serves numerous Silicon Valley startups, is also one of Circle's cash reserve banks and is now facing financial crisis. The sudden 7% drop in Bitcoin and Ethereum caused a market-wide decline.

Currently, Circle has not made a public response, while Silicon Valley Bank specifically stated in the investor letter that "the exposure to cryptocurrency is minimal," without explaining the reason for the hasty sale of all marketable securities to adjust the investment portfolio.