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Silicon Valley Bank Collapse Explained In 2 Minutes

The main reason for Silicon valley bank collapse is COVID. Let me explain. In 2020, when the whole was in lock down, people like you and me sitting at home, getting bored, started to have new ideas every single day. Day. This led to a flurry of startups in the beginning of 2021. These startups started to get huge fundings from VCs. and they started to deposit this funding in SVB. because SVB is known for start-ups. All of sudden, SVB was sitting on billions of dollars and started to invest this money in bonds. The price of the bonds at that time was high. Now at the same time, the US Fed started to raise the interest rates and Bond prices started to fall. So SVB started to make losses and that’s ok, this happens. But the problem was because of the high Fed rate, startups were not getting money from the market so they needed to go back to SVB to ask for their deposits and banks had to start selling bonds at the loss. And the stupidity is they started announcing that we are making a loss so more start-ups started to withdraw the money. And within hours, there was a panic within the start-ups that the bank was going to collapse so they withdrew all the money and this led to even further loss. So where did it all start, it started from COVID. Any questions? #siliconvalleybank #finance #economy