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Breaking News: Coinbase Confirms DOJ Investigation Following Major Security Incident

Is Moody’s Ratings Downgrade The Reason Why Silicon Valley Bank Fell?

Dalmas Ngetich
Dalmas Ngetich
2 years ago
3 mins read
Moody's Rating and Silicon Valley Bank

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The collapse of Silicon Valley Bank and news that Circle, the issuer of USDC, was exposed to the tech lender has caused reverberations across the stock and crypto markets. However, could Moody’s rating downgrade of SVB have accelerated the bank crash? 

Moody’s Rating Of SVB

Moody’s Investors Service downgraded the credit ratings of SVB Financial Group and its subsidiary, Silicon Valley Bank. The call came after the value of bonds where SVB had their money tied drastically fell due to the higher interest rates. Subsequently, Moody’s lowered Silicon Valley Bank’s long-term local currency bank deposit ratings to Caa2 from A1 and its issuer ratings to C from Baa1. 

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This news came after Standard and Poors (S&P) Global downgraded SVB Financial Group and Silicon Valley Bank’s credit ratings to junk status, further predicting that the bank would likely declare bankruptcy. 

SVB’s response to the downgrade prospect was to sell more than $20 billion worth of low-yielding bonds, to improve the value of their holdings before knowledge of their downgrade was made public. This severely reduced the timeframe since they needed to do the preparatory work needed to sign confidentiality agreements with investors required to commit to a deal of such a size. 

Its lawyers advised the bank that investors need at least 24 hours to digest the new financial projections and complete the sale, and unfortunately, most of the investors needed more time to meet the required deadline. 

The plan was to take the proceeds from the sale and reinvest them in assets that delivered higher returns. However, their plan backfired.

Since most of SVB’s clients are within the technology sector, particularly the recently recovering crypto industry, the implication of a potential crash similar to FTX or Three Arrows Capital (3AC) was significant. 

Bitcoin Price On March 12| Source: BTCUSDT On Binance, TradingView
Bitcoin Price On March 12| Source: BTCUSDT On Binance, TradingView

With the risk of bankruptcy looming, some investors and clients began withdrawing their deposits and looking for alternative banking options, potentially leading to further instability in SVB’s financial system.

Silicon Valley Bank Attempts To Soften The Blow

With the initial plan falling through, SVB lined up private equity firm General Atlantic, which agreed to buy $500 million of the $2.25 billion stock sale. By Wednesday, SVB had sold the bond portfolio for a $1.8 billion loss. Moody’s downgraded the bank only by a notch because of SVB’s bond portfolio sale and plan to raise capital.

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USDC Market Cap Dips By $10billion In 2 Weeks, Here's Why

Binance And Coinbase Temporarily Suspend USDC Conversion After Silicon Valley Bank Collapse

2 years ago

By Thursday, SVB’s stock plunged by 60%. Venture capital firms then began advising startup companies to withdraw funds from the bank.

General Atlantic and other investors walked away, and the stock sale collapsed completely. California banking regulators closed the bank on Friday and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver, triggering a drop in crypto prices, including Bitcoin.

Feature Image From International Investment Bank, Chart From TradingView
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Dalmas Ngetich
Dalmas Ngetich

Dalmas Ngetich

Dalmas, a seasoned crypto reporter, brings a unique perspective to the industry. His specialization in NFTs, blockchain, DeFi, and blockchain news for NewsBTC, combined with a background in mechanical engineering and over a decade of experience in journalism, has allowed him to craft over 10,000 news and feature articles over the past eight years. His diverse range of topics, including technology, Forex, and finance, reflects his comprehensive understanding of the crypto landscape.

Read more

His technical expertise and analytical skills have been recognized and featured by leading news outlets such as Investing.com, CoinTelegraph, Entrepreneur, Forbes, and other authority sites. Notably, he broke key news, including the Ripple and MoneyGram partnership, cementing his position as a thought leader in crypto.
The news exploded. Over 100,000 people devoured this meticulously crafted report, from seasoned investors to curious newcomers. His analysis wasn't just dry facts and figures; it crackled with insight, dissecting the implications of the partnership and its potential impact on the future of finance.

His deep understanding of the financial markets, technological advancements, and blockchain developments has made him a respected voice in the industry.

Dalmas is also the founder of BTC-Pulse, a crypto news site, further demonstrating his commitment to the field. He firmly believes that DeFi and NFTs are here to stay and will continue to drive financial inclusion.

Coming from Nairobi, Kenya, it is easy to see the source of his inspiration: Across Africa, millions lack access to traditional banks. Remote villages, limited documentation, and high minimum balances create insurmountable barriers.

DeFi, not just Maker or Aave, for example, but think of Bitcoin and USDT, cuts out the middleman. Forget banks with their limitations.
Even so, DeFi isn't a magic solution. The continent still struggles with reliable internet access, and educational campaigns highlighting the benefits of this wonderful solution are insufficient. Moreover, even for those interested, understanding DeFi can look like learning a new language.

Dalmas is here to help make the tech easy to understand and digestible, even for beginners.
The story of DeFi in Africa is still being written. Challenges abound, but the promise of a more inclusive financial future is a powerful motivator. With innovation and collaboration, Dalmas firmly believes that DeFi could become the key to unlocking Africa's full economic potential.
This possibility and its immense value motivate Dalmas to continue breaking key DeFi innovations and more across the globe. His engineering background further enhances his ability to deliver well-thought-out pieces that blend technical insight with clear, impactful reporting.

Beyond his professional achievements, Dalmas is deeply passionate about technology and politics. Policies drive adoption, and being at the forefront and keeping up with how they evolve is crucial for the sphere to mature.

When Dalmas is not closely monitoring the latest crypto events, he can be found in nature, exploring the picturesque countryside, and traveling with his family and friends. His love for adventure and discovery perfectly complements his investigative and reporting skills.
You can connect with Dalmas on X: @Dalmas_Ngetich, or contact him on Telegram @Dalmas_Ngetich.

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Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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Reason to trust

Strict editorial policy that focuses on accuracy, relevance, and impartiality
Created by industry experts and meticulously reviewed
The highest standards in reporting and publishing
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