As soon as the market opens yesterday, my phone was buzzing with stock market alerts. Bank ETFs are down dramatically together with crude oil down, 10-year treasury yield and US dollar. Gold is up understandably. It is flashing recession in the minds of investors.
However, the Nasdaq is up a little bit early when market just opened probably because the yield is down. Some investors think that the Federal Reserve might hesitate to increase the interest rate.
Why did Bitcoin price increase by almost 10% at Monday market opening? I don’t get it. Just because of the rate might not be increased that much by the Fed?
The US government acted quickly to stop the downstream impacts. It will guarantee all depositors access to all their money while taxpayers will not pay for it. How does it work? Today I heard a more detailed podcast by New York Times – The implosion of Silicon Valley Bank. It explained that there is pool of money contributed by banks which will be used for this purpose. It is very important that grassroots people are not paying for the rich tech players. Or it will look very bad, just like the bailing out of big banks who took too much risks in the 2008 financial crisis.
The New York Times podcast episode also mentioned one interesting insights. They said that a few tech billionaires like Mark Cuban took to the social media to incense the fear saying this will lead a disaster if the government doesn’t help the depositors. This forced the hand of the government because panic can really spread the damages.
It also raised a concern that now depositors can just expect government to bail them out in the future. That means there is no more bank run? So banks can take more risks? Darn!
The executives of SVB and other regional banks successfully lobbied the Trump Administration to loosen up the regulations by Dodd-Frank Act created from 2008 financial crisis. This led to the failure.
Will there be more regulations of US regional banks from this? Can’t wait to see. Fortunately, I am in Canada. 😊 Should I invest in US banks now since it was down so much.
Today, as soon as the market opened, the BMO US banks ETF ZBK is already up by more than 5%. Probably because the government’s bailout of the depositors and the CPI number just released today is tamed.
But why did bitcoin rise another 15% today? 😊 Just too dramatic and speculative. It is scary. Perhaps that’s exactly why day traders like it. It is adrenaline pumping.