In the wake of Federal Reserve Chairman Jerome Powell declaring the US banking sector “sound” and “resilient,” several US regional banks experienced plummeting share prices. PacWest Bancorp, a regional bank considering a sale or capital raising, with a 52.5% dive in after-hours trading. Other banks suffering similar declines include Western Alliance Bancorp (22.4%), Metropolitan Bank (16.2%), and HomeStreet (7.8%).
Metropolitan Bank previously served crypto firms but closed its digital asset vertical earlier this year due to discontent with the development of the cryptocurrency industry. On the other hand, Western Alliance Bancorp has integrated blockchain-based payment solutions for its clients through the bank’s blockchain and digital asset branch. Despite these forays into crypto, both banks’ share prices plummeted, leading some to suggest it might be time to hold onto cryptocurrencies instead of investing in traditional banking.
Powell’s calming remarks on the banking sector were accompanied by an announcement that the Federal Reserve would raise interest rates by another 25 basis points. According to the chairman, the overall conditions in the banking sector have improved since early March. He further added that the Fed is committed to learning from this situation and preventing such episodes from happening again.
However, the recent collapse of First Republic Bank, the second-biggest bank failure in the country, has raised concerns about the state of the US banking system. When news of the government receivership surfaced, the bank’s share prices sunk 20% within a matter of hours.
Many on Crypto Twitter have criticized Powell’s statements, citing the problematic collapses of SVB, Silvergate, Signature, First Republic, and now PacWest. The combination of these failures has resulted in more than $500 billion being wiped out from the market in just a month. PacWest Bancorp’s 52% fall alone is expected to eliminate around $340 million from the market cap, which stood at $772 million before the decline.
Despite the skepticism, it’s crucial to remember that the banking industry and the emerging blockchain and cryptocurrency markets are two separate entities. While traditional banking may be facing challenges, cryptocurrencies and blockchain technology continue to gain momentum and influence in the financial landscape. However, it is still essential for investors to remain cautious and prudent, given the volatile and unpredictable nature of the cryptocurrency market, along with the current concerns surrounding the banking sector.