Weekly Flip Thru: Bank Woes Bring Fed Rate Hikes Under Scrutiny

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How are we feeling out there, crypto chums? It has been one heckuva week. The U.S. underwent its most serious banking crisis in over a decade, and the markets are betting that the Federal Reserve will rethink its aggressive interest rate hikes in the face of all the financial turmoil.

One potential safe harbor? Bitcoin. Price notwithstanding, if you hold the keys to your bitcoin (BTC) or other digital assets, that means a panic-induced bank run can’t deplete your holdings.

Vaults come tumbling down

In case you didn’t see any of the news from the banking sector this week, or if you just need a quick summary of what went down, here’s a timeline:

  • March 8, 2023: Silvergate Bank announced they would voluntarily close its business, facing mounting losses from a prolonged crypto winter and fallout from the FTX bankruptcy in 2022. Silvergate was a prolific lender among crypto and crypto-adjacent companies.

  • March 11, 2023: Silicon Valley Bank was hit with a run on deposits, as many of its commercial customers rushed to withdraw their holdings. Silicon Valley Bank carved out a niche among tech startups, and with many tech firms contracting in recent weeks, the need for rapid access to liquidity was swirling around with nervousness over U.S. central bank policy. The Federal Reserve has strung together nearly a year of steady interest rate hikes in a process known as “quantitative tightening” — very different than the days of easy capital being pumped into the U.S. economy during the early days of the COVID-19 pandemic. Silicon Valley Bank was taken over by the Federal Deposit Insurance Corporation (FDIC) before the week was done.

  • March 12, 2023: Signature Bank, another bank that catered to crypto startups, was hit with a run on its deposits similar to the wave that crashed over Silicon Valley Bank. The FDIC put Signature Bank into receivership over the weekend.

  • March 15, 2023: Credit Suisse rushed to assure depositors that its assets were secure and that liquidity levels were sound after one of the bank’s top investors, Saudi National Bank, made it clear that they couldn’t supply any more cash to the bank as it was hit with a wave of withdrawals. Sound familiar? Doubts surrounding Credit Suisse were the clearest signal that panic striking the U.S. banking sector might be spreading to European banks as well.

Fed has doubts

With uncertainty rocking the banking sector, investors are betting that the next round of interest rate hikes coming from the Federal Reserve will be far less aggressive than previous rate hikes – if they even happen at all. The Fed will host its monthly meeting March 22, 2023, and people will be watching closely to see whether the Fed dials in a more conservative hike of 25 basis points (the February 2023 hike was 25 basis points while previous hikes were 50 basis points or higher dating back to March 2022) or if they hold off on raising rates until the summer.

Nice while it lasted? Meta suspends NFTs on Facebook & Insta

Meta, the parent company of Facebook and Instagram, will conclude its limited experiment with NFTs. Meta announced in 2022 that they would roll out the feature for creators to mint NFTs on the Polygon network and make them available to users in 100 countries.

With more than a billion users worldwide, the effort to launch non-fungible tokens (NFTs) on the popular social platforms could be viewed as a major endorsement of the crypto-native technology underpinning NFTs by some market watchers. That said, the tantalizing prospect of onboarding millions of new users to the NFT ecosystem via a partnership with Polygon never truly caught on.

Besides the fizzling results of the experiment among Facebook and Instagram users, Meta is facing some strong headwinds at the moment; CEO Mark Zuckerberg announced a round of layoffs in early March that would hit 11,000 Meta employees, or approximately 13 percent of its workforce.

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