On Wednesday, April 5th, the Federal Deposit Insurance Corporation announced its plans to liquidate $115 billion worth of Signature and Silicon Valley Bank securities. The FDIC became the receiver for the two banks early in March when both were closed by financial watchdogs in the span of just a few days.
FDIC To Sell $115 Billion of Failed Banks’ Securities
This Wednesday, the Federal Deposit Insurance Corporation announced it will soon initiate the “orderly liquidation” of Agency Mortgage Backed Securities, Collateralized Mortgage Obligations, and Commercial Mortgage Backed Securities belonging to Signature and Silicon Valley Bank. The securities set for sale are worth around $27 and $87 billion respectively.
According to the announcement, BlackRock Financial Market Advisory will handle the liquidation. The FDIC highlighted that it will aim to minimize the impact the sale will have on the market and will closely monitor trading conditions and daily liquidity. The FDIC became the receiver of the two banks over the course of several tense days in early March.
Considering that a stock sale initiated by Silicon Valley Bank sparked concerns over the future of the company, its closing by California regulators on March 10th didn’t come as too big of a surprise. The closing of Signature only two days later sent shockwaves and sparked rumors that the move was a part of a wider crackdown on the digital assets sector as the bank was the second major crypto-friendly bank to fail in less than a week.
Cryptocurrencies Surge as Confidence in Banks is Shaken
The events of early March which saw Silvergate, Signature, and Silicon Valley Banks close in less than a week caused what has widely been considered a crisis of confidence in the US banking sector. The turmoil caused the federal government to take extraordinary measures to stabilize the industry and even saw the private sector offer a $30 billion lifeline to the then-shaken First Republic.
While officials initially expressed their confidence in the system, recent remarks by President Bident indicate that the crisis isn’t quite over yet. The events also sparked an unexpected rally for digital assets. While cryptocurrencies were going through a period of stagnation in February, in large part due to regulatory pressure, the downfall of the banks sent the prices of many major tokens significantly up.
Over the previous month, Bitcoin rose more than 25%. It stood at just over $20,000 at the time SVB was closed, and is, by April 5th, above $28,000. Ethereum, similarly, saw a significant rise and went from $1,400 to over $1,900 in the same period.
