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Three American banks (Silvergate Capital, Silicon Valley Bank, and Signature Bank) have failed so far. Another major US bank, First Republic Bank, is in danger after its share price dropped by more than 70% in a single week.Even after receiving a US$30 billion rescue from its larger counterparts on Thursday in an effort to quell the turbulence, it&#39;s share price dropped 33% on Friday.Experts believe that banking stocks would be under pressure as a result of the uncertainty.On the other hand, Credit Suisse is having problems. It is one of only 30 global financial institutions that the global Financial Stability Board says are systemically important.Several central bank governors, like Jerome Powell, chair of the Federal Reserve, and Christine Lagarde, president of the European Central Bank, have reassured the public that the recent volatility is not a sign of another financial crisis like the one in 2008.Still, trust in the international financial system has been shaken, and things are happening quickly.Credit Suisse is reportedly holding meetings to talk about possible outcomes.<h2 id="header-0">What Really Transpired?</h2>When the cryptocurrency market crashed, Silvergate Bank was the first US financial institution to fail.When Silicon Valley Bank said it needed to raise almost US$2 billion to strengthen its finances and had liquidated a large portion of its securities portfolio at a loss, investors naturally became nervous.Over the course of 40 years, SVB established itself as the go-to financial institution for the emerging technology and venture capital industries, eventually growing to become the 16th biggest bank in the United States.Yet as word got out about the bank&#39;s problems, depositors rushed to get their money out. When SVB went bankrupt last Friday, the Federal Deposit Insurance Corporation took over and made it the second-largest bank in U.S. history.Related: <a href="https://www.blockhead.co/2023/03/16/banking-crisis-pushes-crypto-firms-to-seek-asset-managers/" rel="noopener noreferrer nofollow">Banking Crisis Pushes Crypto Firms to Seek Asset Managers</a>&#34;The gov’t has about 48 hours to fix a-soon-to-be-irreversible mistake,&#34; tweeted Bill Ackman, a billionaire investor.Authorities in New York state shut down the local bank over the weekend after customers withdrew a lot of money because they were worried about the business&#39;s bitcoin exposure. On Friday, Ackman tweeted that he believes Bank of America will acquire Signature.It seems that Ackman isn&#39;t the only Wall Street heavyweight to have had this very 2023 epiphany.Ray Dalio, Michael Burry, and Jeff Gundlach are just a few of the billionaires and investors who have taken to social media in recent days to capture the financial crisis and its consequences, highlighting how drastically the world has changed since 2008.The US government, seeing a crisis forming, has taken a series of extraordinary steps to backstop the financial system in an effort to halt the tide of widespread fear.Nevertheless, San Francisco&#39;s First Republic, which serves the personal banking requirements of the tech elite, was infected.Bank of America, which is too big to fail, got almost US$15 billion in new deposits in just a few days because people were leaving regional banks because they were worried about their stability.Apart from the United States, SVB&#39;s demise has been felt all around the world. Due to investors&#39; concerns about the health of financial institutions, a worldwide selloff in financial equities occurred, resulting in a US$465 billion loss over the course of two days.Credit Suisse, a 167-year-old Swiss bank in Zurich, was already in a scandal when its biggest shareholder said it wouldn&#39;t buy more shares.While the Swiss National Bank threw them a lifeline, the future of the banker to the world&#39;s wealthiest is still uncertain.<h2 id="header-1">What&#39;s Going On, And Why is it Happening?</h2>The Federal Reserve has been aggressively hiking interest rates over the past year to curb inflation that has been stubbornly high for decades.Theoretically, a rate hike, which makes borrowing money more costly for individuals and businesses, may cool a red-hot economy and reduce inflation.A recession can be triggered by high-interest rates, and investors in fast-growing industries may be forced to reevaluate their positions if they don&#39;t perceive a positive growth forecast.Even the tech industry, which had a golden age of fast growth and historically low-interest rates during the epidemic, is not safe.Due to the tech industry&#39;s downturn, SVB saw a significant increase in client withdrawals. On the asset side of the ledger, SVB was negatively impacted by rising interest rates because of its massive holdings of longer-maturity bonds.When SVB had to sell a big chunk of those bonds at a loss, it shook the trust of its customers. Peter Thiel, a well-known venture capitalist, was one of the people who tried to take out $42 billion in one day.As it turns out, the interest-rate risk was highlighted as a major issue at SVB over a year ago by the Federal Reserve Bank of San Francisco.The Fed has pledged to look into its banking supervision practices.<h2 id="header-2">For You Personally, What Does This Mean?</h2>The current instability in the banking sector raises the prospect of a recession and has far-reaching ramifications for individuals&#39; ability to make sound financial decisions.Financial experts warn that this could make it harder for people to get credit, raise the interest rates on their savings, or make their investments lose value.Anxiety among depositors regarding the security of their funds has also increased since the collapse. The Federal Deposit Insurance Corporation (FDIC) guarantees up to US$250,000 per depositor in insured institutions in the event of a bank failure.Several experts believe the Fed may temporarily halt rate rises.It&#39;s wonderful news for would-be homeowners who&#39;ve been put off by the current high mortgage rates. High-yield savings accounts and other cash-like instruments have been popular with investors this year, but they may see lesser returns if this trend continues.For now, the cryptocurrency market is seeing a reversal in fortunes, and flagship crypto Bitcoin is up almost 25% in the past week. The rally has provided a silver lining in a sea of red. But against this backdrop, it&#39;s hard to keep an optimistic outlook much longer.Related: <a href="https://www.blockhead.co/2023/03/18/are-guardians-of-investors-letting-them-down-kpmg-silicon-valley-bank-signature/" rel="noopener noreferrer nofollow">Are Guardians of Investors Letting Them Down?</a>The world of Web3 can be quite a whirlwind. Whether it’s crypto news in Singapore, South East Asia or even across the globe, we understand how busy the industry is keeping you, so we kindly send out three newsletters each week:<ul><li><a href="https://blockhead.co/tag/blockbeat?ref&#61;blockhead" rel="noopener noreferrer nofollow">BlockBeat</a> for a wrap-up of the week’s digital assets news</li><li><a href="https://blockhead.co/tag/blockhead-brief?ref&#61;blockhead" rel="noopener noreferrer nofollow">Blockhead Brief</a> for weekend happenings as well as what to look forward to in the week ahead</li><li><a href="https://www.blockhead.co/tag/business-bulletin/" rel="noopener noreferrer nofollow">Business Bulletin</a> for macroeconomic updates and industry developments.</li></ul>To avoid FOMO and access member-only features, click <a href="https://www.blockhead.co/#/portal/" rel="noopener noreferrer nofollow">here</a> to subscribe for FREE.

A Wild Week in Finance: What Happened, And Where Do We Go From Here?

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