This is part 2 of a previous post. Read the first post here. 

For years, the crypto market operated seperately from the traditional financial sector. However, as investors saw how much money flowed into crypto, the more financial investors and lending firms became involved. They wanted a piece of the pie too. They started offering services to crypto companies.

When crypto firms started collapsing, the damage didn’t stay in the crypto world, it brought down regular banks with it. In early 2023, three banks failed: Silicon Valley Bank, Silvergate Bank, and Signature Bank (the fact that they all start with an S is a coincidence). These banks didn’t trade cryptocurrency, but they worked closely with crypto companies, and took their money.

Silvergate and Signature did business with FTX. Silvergate lost $1 billion at the end of 2022 when investors pulled their money out. Signature collapsed for a similar reason because most of its deposits came from crypto businesses. Silicon Valley Bank wasnt as focused on crypto, but failed after reporting losses from selling assets to raise emergency funds.

All three banks fell one after another, much like the crypto firms before them. This chain reaction shows that crypto and traditional finance are no longer separate. A crisis in one can quickly trigger problems in the other. I know Im not the only one nervous about this relationship. At the end of the day, your money isn’t safe anywhere. Might as well invest it.