"Capital comes into the world, dripping with blood and filth from head to toe, from every pore." When Marx spent 40 years writing "Das Kapital", he probably did not expect that this sentence would become a classic and resound around the world.
On March 10, Silicon Valley Bank was closed by financial regulators due to "lack of liquidity and insolvency", which instantly set off a "huge wave" in the global market. This is the second largest bank to fail in US history and the bank that went bankrupt the fastest. The most fatal thing is that it is the largest bank to fail since the 2008 financial crisis.
Behind the evaporation of trillions of assets is the stock market crash. On March 13, bank stocks in the U.S. stock market plummeted, with First Republic Bank plummeting 61.83%, Alliance Western Bank plummeting 47.06%, Metropolitan Bank plummeting 43.72%, and First Fund plummeting 33.07%. Other large banks in the United States were also almost unscathed. JPMorgan Chase, the largest bank by assets, fell 1.8%, Bank of America fell 6%, Citigroup fell 7%, Morgan Stanley fell 2%, and Goldman Sachs fell 4%.
This series of reactions has put the United States into a vicious cycle.
The "butterfly effect" of Silicon Valley Bank has just begun. On March 12, when the United States was still immersed in the shadow of the collapse of Silicon Valley Bank, the regulatory authorities closed the New York-based Signature Bank on the grounds of "systemic risk". On March 20, the 14th largest bank in the United States, First Republic Bank, also began to collapse, with its stock price plummeting by more than 47%, and its credit rating was downgraded to "junk level" by Standard & Poor's.
Since then, the US banking industry has been completely caught up in the crisis, with the initial 10 banks affected now facing nearly 200 banks facing bankruptcy. Industry insiders said that if these 200 banks collectively have problems, the US will experience a financial disaster comparable to the 2008 financial crisis. In fact, it will be worse than the 2008 financial crisis.
Silicon Valley Bank collapses, Bitcoin rises
"I saw it rise, and I saw it fall."
How big the storm caused by Silicon Valley Bank is depends on what the United States does. Either it completely lets go and lets Silicon Valley Bank, a domino, keep falling, forming an increasingly large butterfly effect; or it makes every effort to completely resolve this financial crisis. After the bankruptcy incident, the United States' approach was to let Biden come forward and invite various capital giants to pay money and endorse the solution to the current financial crisis.
This practice reminds people of the taunt that Satoshi Nakamoto has left in the Genesis Block.
On January 3, 2009, Satoshi Nakamoto created the first block in the Bitcoin world and wrote on it an endless satire on the US financial system, "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks". This sarcastic remark was exactly the headline of the Times that day, "On January 3, 2009, the Chancellor of the Exchequer was on the brink of implementing a second round of emergency aid for banks".
Just like the situation back then, from the collapse of Washington Mutual Bank in 2008 to the bankruptcy of Silicon Valley Bank in 2023, the financial crisis in the United States reappeared 15 years later, which just reflects that the US financial system is unprepared for the return of inflation and turns a blind eye to the subsequent normalization of monetary policy. This makes people understand more clearly the original intention of Satoshi Nakamoto to create Bitcoin, which is to save banks with freedom and fight against hyperinflation, economic crisis, and all the drawbacks of the old credit currency system.
A gentleman does not stand under a dangerous wall, and money does not stay in an uneasy place. After the collapse of Silicon Valley Bank, Bitcoin's attributes as a safe-haven asset have been released again. In the past week, as global inflation concerns continue to ferment, Bitcoin, which has long been strongly correlated with U.S. stocks, has not only not collapsed, but has rarely decoupled and rebounded strongly, breaking through the $22,000, $25,000 and $28,000 levels in succession, and also set a record high since June 12, 2022.
It can be said that Silicon Valley Bank, on its own, has dragged down the share prices of a number of banks, and also brought Bitcoin, which was already in dire straits, back to shore.
In the new round of market, has Bitcoin entered a bull market?
Since 2023, Bitcoin has been creating new highs for the year, up nearly 70% from the beginning of the year. In particular, influenced by Silicon Valley Bank, Bitcoin prices have broken through obstacles and continued to rise, and related monthly charts, quarterly charts and on-chain indicators are flashing optimistic signs. The change in Bitcoin's market has given industry insiders a vision of Bitcoin's future price. CryptoQuant founder Ki Young Ju even directly declared on Twitter: "Bitcoin has entered a bull market phase."
Marshall Beard, chief strategy officer of Gemini, a representative of optimism, believes that the price of Bitcoin could reach as high as $100,000. Paolo Ardoino, chief technology officer of Tether, a representative of conservatives, believes that Bitcoin may approach its historical high of $69,000. Compared with the first two, Balaji Srinivasan, former technical director of Coinbase, has a very wild view. He believes that Bitcoin will be worth $1 million or more within 90 days.
However, just when the market was full of confidence that Bitcoin was finally entering a bull market, the Federal Reserve dealt another heavy blow.
On March 23, the Federal Reserve's interest rate meeting, which has attracted worldwide attention, officially "came to fruition". The Federal Open Market Committee (FOMC) of the Federal Reserve announced that the target range of the federal funds rate would be raised by 25 basis points (bps) to between 4.75% and 5%. This is the ninth consecutive rate hike since March last year, setting a record high since September 2007, just before the outbreak of the financial crisis. According to the CME FedWatch tool, more than 87% of investors expected a 25 basis point rate hike, so this increase was largely expected.
But Powell's hawkish remarks after the meeting made the market feel fearful. He said that despite the collapse of the regional banking system, the Fed is not worried. The US banking system is sound and resilient. In order to continue to fight inflation, it is not expected to cut interest rates this year. Since then, the US dollar has plunged, and cryptocurrencies have fallen along with the US dollar. After the latest interest rate decision was announced in the early morning of the 23rd, Bitcoin fell rapidly from $28,800 to $27,000 at one point, down 2.6% in the past 24 hours, and the market took a sharp turn for the worse. In addition to cryptocurrencies, the three major US stock indexes also fell, the 10Y US Treasury yield fell slightly, and the US dollar index fell sharply.
Objectively speaking, the Fed's decision to raise interest rates this time is equivalent to a "policy combination", which attempts to maintain the Fed's prestige by raising interest rates on the one hand, and to appease market sentiment by adjusting its statements on the other. However, from reducing the rate hike to abandoning the statement that implies continued rate hikes in the policy statement, the market interprets it as the Fed's rate hike process is nearing its end.
It remains to be seen whether Bitcoin will continue to interpret the value attributes of a safe-haven asset and continue to rise amid the banking crisis, or gradually pull back amid the hawkish remarks of the Federal Reserve.
But one thing is beyond doubt: Bitcoin was born out of a banking crisis and will inevitably turn into a banking crisis.
For Bitcoin, the global economic turmoil caused by the collapse of Silicon Valley Bank in the United States is both an opportunity and a challenge. Whether it is an uptick, a pullback, or a correction, every market change will bring a huge trading opportunity. We just need to know that timing is always more important than method.
