Bitcoin market cap added $200 billion or 65% since the beginning of 2023, while the S&P 500 broad market index gained 2.5%. Banking troubles inspired crypto enthusiasts, as some think that investors could seek shelter in crypto assets. That is absurd. No fund manager would ever sell risky stocks to buy even more risky cryptocurrencies.
However, the stock market in the United States needs to be monitored as the threat of expanding banking troubles has not disappeared yet. Smaller regional banks are in the risk zone, while large banking institutions, like JPMorgan Chase, the Bank of America, Citigroup, Wells Fargo, Morgan Stanley, and Goldman Sachs are also suffering, as they lost nearly $100 billion in market cap. The market cap of the U.S. banking system is $2 trillion less than it should be according to the overall balance value of the assets until maturity and credit portfolios.
Silicon Valley Bank (SVB) was not even the most troubled as 10% of American banks have even bigger paper losses and lower market cap. The main reason why depositors ran was the disproportionally high share of unsecured funding together with losses. More than 190 banking organisations in the United States could be in serious trouble if 59% of their depositors decide to withdraw their funds. This is around $300 billion. The recent drop in the value of banking assets made banks extremely vulnerable to depositor’s panic.
With this being said, the crowd is not yet ready to seek serious alternatives in cryptocurrencies. Even Bitcoin is a weak alternative after FTX crypto exchange scandal collapse. The funding is also expensive as interest rates are high. This makes speculative operations riskier than before the collapse of SVB. Furthermore, the recent macroeconomic data in the U.S. indicates more room for monetary tightening.
Meanwhile, the sentiment in risky assets should be monitored closely to be ready for the crypto assets’ prices to reverse down.