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Analysis: How social media killed Silicon Valley Bank

Press Releases Crypto News CryptoSlate Analysis: How social media killed Silicon Valley Bank

The following is a guest post by web3 strategist Toby Fan, and Aly Madhavji, Managing Partner at Blockchain Founders Fund.

Social media has forever changed how we view and manage financial crises. Banks need a way to tactfully handle what is now being coined “social media risk.” Viral games of the telephone played at an exponential scale allow very little time for nuanced investigation or thoughtful reaction. By incorporating social media into overall risk frameworks, banks can help shape the narrative and public perception through pre-emptive and transparent customer engagement. Aggregation and monitoring tools are becoming increasingly important to monitor for early signs of trouble and navigate this landscape of rapid information ingestion and uncontainable spread.

Recent collapses of some of the largest crypto-associated banks ($SIVB, $SI, $SBNY) have sent jitters through tech, crypto, and banking sectors. Many startups were left wondering whether they could meet payroll obligations, while regional banks caught whiffs of a bank run for the first time since the subprime mortgage crisis.

Crowd-sourced interpretations of information regarding $SIVB’s financial health gave depositors a crash course (no pun intended) in Game Theory 101 — putting many startups and tech companies in the shoes of a prisoner on a textbook payoff matrix: withdraw deposits now or risk holding the bag.

How It All Went Wrong

On Mar 8, Moody’s downgraded $SIVB bank deposit and issuer ratings. On the same day, $SIVB announced a proposed sale of $2.25bn in stock, along with a balance sheet repositioning showing a $1.8bn realized loss from selling fixed-income assets that had lost significant market value with the recent hike in Fed rates.

Like many bank runs before this one, depositors, many of them VC-funded and crypto companies, wasted no time playing a game of chicken. Within a day or two, $SIVB balance sheets were d

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Author: News Desk

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