Jump to content

US banking crisis – what now?


Recommended Posts

The US has stepped in and taken over two banks this weekend, but does it solve the crisis?

bg_fed_federal_reserve_gettyimages_13593Source: Bloomberg
 
 Chris Beauchamp | Chief Market Analyst, London | Publication date: Monday 13 March 2023 

What happened over the weekend?
US regulators stepped in to take over collapsed banks Silicon Valley (SVB) and Silvergate, and announced that depositors would be protected. Simultaneously, it also announced a new Bank Term Funding Program (BTFP) that would provide liquidity for any bank in need of it.

Does this stop the crisis?
Potentially. It means that the risk of a bank run has been greatly reduced, but as early trading on Monday shows it looks like other regional US banks are still at risk of heavy losses in their stock prices. Big banks appear to be the safe haven, with money likely flowing to these and away from smaller firms.

What does this mean for the Federal Reserve?
Goldman Sachs has already come out to say that it does not expect a rate hike at the March meeting of the Federal Reserve. Analysts have argued that the bank crisis is revealing the stresses imposed on the system by the move from ultra-low interest rates, and to push on with rate increases will only increase the pressure and run the risk of further bank crises, while simultaneously increasing the risk of a recession.

Others, however, have said that the new support programme for banks may allow the Fed, over time, to actually go higher in terms of its terminal interest rates (i.e. how high they go before pausing), since it removes or reduces the problems experienced by SVB for other banks. Nonetheless, a pause may still happen at the March meeting in order to allow volatility to subside and reduce the stresses on the system.

What is the impact on markets?
Initial gains for futures markets in the US and Europe seemed to suggest investors were relieved that the Fed had stepped in. But losses have returned as the cash session got underway, sparked by big drops for the stock prices of other US banks.

Fears of a fresh banking crisis will of course provide a reason for stock markets to keep dropping. For European indices this means more of the gains from Q4 last year could disappear, while US indices could be in for a retest of last year’s lows, and potentially even further than this.

Safe-haven demand will likely boost the US dollar, though with many analysts expecting the Fed to pause its tightening efforts in March (and possibly beyond), the greenback might struggle in the short-term.

Much depends on whether the crisis expands beyond banks, and turns into a general risk-off move. This would then engulf most assets, and even gold might not be immune if the dollar strengthens.

Link to comment

SVB containment measures provide some market respite

The US moves to contain the likely fallout from the collapse of Silicon Valley Bank (SVB). This gives traders some respite and prompts expectations that a March Fed rate hike is no longer a certainty.

Angeline Ong | Presenter, Analyst and Content Editor, London | Publication date: Monday 13 March 2023

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • image.png

  • Posts

    • Basically, they're letting creators mint NFTs and other digital stuff across multiple blockchains at once. Holograph isn't the only one trying to build bridges between blockchains. Projects like Omnibridge and Wormhole are also in the game, each with their own way of moving your digital assets around.  While Holograph focuses on this "native minting" thing across chains, other projects might be a better fit depending on what you need. Doing your research is key! Definitely something to consider. While Holograph recently scored a cool $11 million in funding, omnichain functionality is still pretty new. They've also got some interesting features, just landed on Bitget, and seems to be building an empire state. There could be bumps in the road, so be sure to do your own research and understand the potential risks. So, what do you think? Is Holograph the future of NFTs, or is it just a bunch of hype? Have you tried any other cross-chain solutions? Let's hear your thoughts in the comments!
    • May 22nd marks Bitcoin Pizza Day, a celebration of the first real-world transaction using Bitcoin. In 2010, Laszlo Hanyecz made history by offering 10,000 Bitcoins for two Papa John's pizzas, showcasing Bitcoin's practical potential. The cryptocurrency community commemorates this milestone with various events, including meetups, webinars, and giveaways. Bitget's Pizza Day Raffle is one such event, offering prizes in cryptocurrencies and tokens. Whether you're interested in Bitcoin's history, community, or uses, this event is worth exploring.
    • HashPack rocks. Their wallet's is easy to use, and they're everywhere in Hedera (dApps, DeFi, NFTs). The Bitget listing is gonna be insane for them.
×
×
  • Create New...
us