Crypto-focused venture capital investors are urging firms to remove their assets from Silicon Valley Bank as it fails to reassure customers about its financial state. Both the stock and crypto markets are experiencing a downturn, causing panic among traders.
This announcement follows a significant drop in the shares of SVB Financial Group, the bank's parent business, which plummeted by over 60% on the same day that the news was released. Earlier this week, Silicon Valley Bank announced a stock offering of $1.75 billion and a separate purchase of $500 million of common stock by private equity firm General Atlantic to strengthen its balance sheet. However, this announcement caused investors to sell their shares, leading to a sell-off. In addition to the initial 60% drop, SVB Financial Group's shares lost an additional 44% during pre-market trading on March 10th.
Bloomberg has reported that Founders Fund, led by Peter Thiel, has suggested that its portfolio companies withdraw their funds from the struggling Silicon Valley Bank. Another firm, Pantera Capital, which functions as both a hedge fund and a venture investor, has recommended that its portfolio companies explore opening multiple accounts. The report further states that five other venture capital investors who specialize in cryptocurrency have provided comparable guidance to their sponsored companies. However, they have asked to remain anonymous due to commercial considerations.
Following the collapse of cryptocurrency-friendly Silvergate Bank earlier this week, SVB is struggling at a time when cryptocurrency firms are seeking alternative banking options. A web3 company owner, who preferred to remain anonymous, reported having trouble accessing their account, a problem that has been raised on Twitter by several users. SVB is a preferred bank for numerous venture-backed tech businesses in the US, having served over 2,600 customers in the fintech industry alone, according to its website. However, the bank has faced challenges due to a downturn in the venture capital market over the last year. During a conference call earlier today, SVB's CEO, Greg Becker, advised customers to "stay calm," according to a Bloomberg report.
On March 10th, many cryptocurrencies, including bitcoin (BTC) and ethereum (ETH), experienced losses, with BTC down by 8% and ETH by almost 9%. Huobi's HT token, on the other hand, suffered a significant loss (-18% in 24 hours) for different reasons. It experienced a flash crash earlier in the day, losing 90% of its value before quickly recovering. Huobi's CEO, Justin Sun, attributed the crash to leveraged liquidations triggered by a small number of users, resulting in a chain reaction of forced liquidations in the spot and contract HT markets.