- FDIC closed Silicon Valley Bank today and took control of its deposits.
- Austin Campbell says it could actually be a benefit for Signature Bank.
- Shares of Signature Bank ended more than 20% down on Friday.
Shares of Signature Bank (NYSE: SBNY) ended more than 20% down today following the collapse of its crypto banking peer SVB Financial.
SVB marks one of the largest U.S. bank failures
On Friday, the Federal Deposit Insurance Corporation closed the said bank and took control of its deposits – a development that particularly shook financial stocks since such a bank failure was last seen only during the global financial crisis.
Remember that the news follows an announcement also from Silvergate Capital that it will liquidate its crypto bank. Consequently, a bunch of crypto companies in recent days picked Signature Bank as a replacement.
Still, the New York-based commercial bank says it’s exposure to digital assets is fairly small. “SBNY” is now down about 35% for the year.
Pro explains what it all means for Signature Bank
On the plus side, Austin Campbell of Zero Knowledge Consulting expects both Silvergate and the SVB news to actually be a benefit for Signature Bank.
He’s convinced that the diversified deposit base will help it avoid falling prey to the same structural weakness. In a tweet this afternoon, Campbell wrote:
Keep in mind you have to be a forced seller. Deposits moving from SVB go to other banks so this is likely improving the position of competitors like SBNY.
His view is in line with the JPMorgan analyst Vivek Juneja who also doesn’t expect the SVB fiasco to spill over to other banks. In January, Signature Bank said its net income increased just over 10% year-on-year in its fourth financial quarter.
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Recent events have revealed that the collapse of the now-defunct crypto bank SVB may potentially put the company in a stronger position in the future. Although news of SVB’s bankruptcy has roiled members of the crypto community and sent shockwaves throughout the financial world, there are reasons to be optimistic.
The most laudable benefit of the collapse of SVB is its potential reinvigoration of the crypto economy. Without the restrictions posed by the former crypto bank, entrepreneurs now have more freedom to come up with innovative solutions for their businesses. As investors recognize the benefits of the change, participation in the sector could increase, leading to more opportunity for growth.
Second, the bankruptcy of the late SVB could lead to a more secure crypto ecosystem. Though the specifics of the bank’s collapse are still being investigated, it appears that the institution failed to adequately protect users from external and internal threats. With new protocols in place, the risk of fraud and other criminal activity could be reduced.
Third, the collapse of SVB may have a positive effect on the overall perception of cryptocurrencies. Since the end of the bank, other financial institutions have become more receptive to cryptocurrencies, leaving the industry more legitimate than ever before.
To conclude, the collapse of SVB could be a blessing in disguise. By spurring the development of the crypto economy, creating a safer ecosystem, and boosting the standing of digital currencies, the former crypto bank may, ironically, lead to a more prosperous future. With greater freedom, more funds, and a reputation for trustworthiness, the crypto sector could thrive as never before.
