Bitcoin and gold benefit from the spreading banking contagion as SVB Financial Group files for bankruptcy

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(Kitco News) – SVB Financial Group, the parent company of Silicon Valley Bank (SVB), has filed for bankruptcy, a move that will help facilitate the sale of remaining assets after federal regulators seized SVB on Friday, which was at the heart of the group’s business model .

According to a Wall Street Journal report, SVB Financial Group, which filed for Chapter 11 bankruptcy protection in a New York bankruptcy court on Friday, has now become the largest bankruptcy filing resulting from a bank failure since the collapse of Washington Mutual in 2008.

Silicon Valley Bank, which is now under the control of the Federal Deposit Insurance Corporation and operates as Silicon Valley Bridge Bank NA, is not part of the Chapter 11 filing.

The other businesses under the SVB Financial Group umbrella included in the bankruptcy filing include SVB Capital, an investment manager that oversees $9.5 billion in funds on behalf of third-party investors, and SVB Securities, an investment bank.

A statement released by the group on Friday indicated that along with Silicon Valley Bank, SVB Private, an asset management company previously owned by the parent company, is no longer associated with SVB Financial Group.

SVB Financial Group’s listed stock, SIVB, has been suspended since March 9 and has more than $3 billion in bond debt and nearly $4 billion in preferred stock, which has fallen to distressed levels since the bank entered bankruptcy.

The global banking industry has been in flux since last Friday when federal regulators seized SVB after $41 billion worth of funds were withdrawn from the institution in 24 hours, putting its balance sheet in the negative and threatening the livelihood of a number of tech startups and venture . capitalists.

Over the weekend, the US government announced emergency measures and promised that all depositors would be made whole in an attempt to calm the markets. But that hasn’t stopped many from shuffling their money to bigger, more financially sound banks like JPMorgan, or seeking out other stores of wealth, like gold and Bitcoin (BTC).

While the moves by the United States helped calm matters somewhat on Monday, leading to a brief turnaround in share prices, the banking contagion spread to European institutions, notably Credit Suisse, which eventually needed a $54 billion bailout from Swiss National. Bank to prop up its books and prevent a collapse.

In the US, a group of 11 of the biggest banks – including JPMorgan, Bank of America and BNY Mellon – banded together to offer a $30 billion unsecured lifeline to struggling First Republic Bank to prevent its demise.

Despite these efforts, the share prices of both Credit Suisse ( CS ) and First Republic ( FRC ) continued to fall in trading on Friday as investors chose to take a safer route by withdrawing their money on suspicion that the threat is extinguished. .

The struggles of the global banking system have caught many flat-footed, as those who trusted the system to function properly and secure their wealth now struggle to find reliable stores of wealth.

This has benefited both gold and Bitcoin, which have regained their safe haven status in the eyes of many investors. Since March 8, the price of gold has risen 8.38% from $1,810 an ounce to its current price of $1,960, while Bitcoin has seen its price rise by nearly 38% from a low of $19,700 on March 10 to a high of 27 $185 in early trading on Friday. .

With banking contagion showing no sign of abating as it spreads across Europe and the smaller banks in the US, there is a good chance that both crypto and precious metals could continue to see upside potential as global citizens slowly lose faith in the banking system.