• Silicon Valley Bank is facing huge liquidity issues, which could have a significant impact on the crypto industry.
• The bank 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.
• VCs like Mechanism Capital, Eden Block, Pantera Capital have advised their portfolio companies to withdraw funds from the troubled bank.
Silicon Valley Bank’s Troubles
Silicon Valley Bank is a behemoth in the U.S. startup space with about $200 billion in assets under management (AUM). Recently, the bank has been facing huge liquidity issues due to historically fast interest rate hikes in the U.S., exposing underlying liquidity issues. In response to this shock, Silicon Valley Bank recently announced a $1.75 billion stock offering this week and a $500 million common stock purchase by private equity firm General Atlantic to shore up its balance sheet; however, its shares went down 60% on Thursday and are down another 62% on Friday’s premarket session according to data from Yahoo! Finance and some users report not being able to log into their accounts.
Risk To Crypto Industry
The potential collapse of Silicon Valley Bank poses a significant risk to the crypto industry, especially crypto-friendly venture capital (VC) firms such as Sequoia and Andreessen Horowitz (a16z). With less than ideal options for banking services for startups and VCs looking for financing of their projects, financial instability at Silicon Valley Bank could spell trouble for these entities in terms of finding alternative sources for their funding needs.
Advice From Crypto VCs
In response to Silicon Valley Banks troubles some crypto VCs have already sounded the alarm bell about it advising their portfolio companies to withdraw funds from them as soon as possible before things get worse .This include Mechanism Capital ,Eden Block ,Pantera Capital ,etc who have all issued advisories warning against keeping money at Silicon Valley Banks till further notice .
Impact On Crypto Projects
The potential demise of Silicon Valley Bank would mean serious trouble for crypto projects as well as US startups landscape . For example , if investors pull out their money from banks like SVB then it can become difficult for new projects or startups that require financing from banks or venture capitalists .
Silicon Valley Banks troubles can potentially create long term problems for both traditional banking systems as well as cryptocurrency sector given its huge role in providing banking services especially related to venture capital investments . Therefore it’s important that everybody who had invested money in SVB should take appropriate measures regarding safety of those funds immediately .