The implosion of Silvergate Bank has a lot to do with the fact that it was crypto's bank of choice. But it's also a prime example of the hidden insolvency that exists across much of the banking sector.
balance sheet — but that wasn't enough to save it because in today's high-rate environment, even strong balance sheets can tip into insolvency when they start to shrink.A bank's deposits are its liabilities — it owes that money to its depositors on demand. On the other side of the balance sheet are assets, which are generally in the form of bonds and loans.
When interest rates rise, the value of those bonds falls, eroding the value of the bank's assets."The financial world has been massively long bonds in a rising rate environment, a troubling scenario that hasUnder Generally Accepted Accounting Principles, or GAAP, banks don't need to mark their bond holdings to market so long as they're holding those bonds to maturity.sell down its assets to meet withdrawals.
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