Silicon Valley bank crisis spurs record crypto asset withdrawals

During the most recent bout of market volatility, precipitated by the Silvergate and Silicon Valley Bank failures, institutional investors flocked to the exits, causing a 10% decline in the assets under the management of cryptocurrencies.

According to CoinShares, digital asset investment products had outflows of $255 million for the week ended March 12, marking the fifth consecutive weekly fall and the greatest seven-day decline on record.

The 10% decline in assets under management (AUM) in 2023 erased all gains.

Bitcoin, the biggest and most prominent crypto asset, had a $244 million decrease. The AUM of ether products decreased by $11 million, while the AUM of multi-asset funds increased by $2.2 million.

The year-to-date flows for Bitcoin, Ether, and multi-asset funds are currently negative. Despite slight withdrawals from short Bitcoin contracts this week, these assets have enjoyed total inflows of $49 million this year.

The week before, investors were on edge when Silvergate Bank, a cryptocurrency-friendly banking institution, declared that it would cease operations and sell its remaining assets.

Silvergate’s announcement earlier this month that it would postpone submitting the appropriate paperwork with the United States Securities and Exchange Commission sparked significant concerns about the company’s financial standing.

Silvergate’s announcement earlier this month that it would postpone submitting the appropriate paperwork with the United States Securities and Exchange Commission sparked significant concerns about the company’s financial standing.

Similar to other businesses, Silvergate’s issues originated from its association with the now-defunct FTX bitcoin exchange.

The abrupt shutdown of Silicon Valley Bank (SVB), a banking institution with extensive links to crypto-focused venture capital firms, added to last week’s upheaval.

The Federal Reserve, U.S. Treasury, and Federal Deposit Insurance Corporation affirmed over the weekend that they would guarantee all SVB deposits despite the bank’s failure.

The conclusion of the SVB crash seems to have bolstered trust in the cryptocurrency industry, resulting in wide market rallies for Bitcoin and other cryptocurrencies.

The price of Bitcoin hit a high of $24,639 on March 13 after dipping below $20,000 the previous week.