Author: Crypto Chan Shi@crypto_chanshi Reposting requires authorization
Key takeaway upfront: The collapse of Silicon Valley Bank (SVB) is highly likely to trigger similar behavior across other U.S. banks—prompting widespread sales of securities assets and a cascade of “cutting off limbs to save the body”-style emergency measures, accelerating financial market failures in the U.S. If inflation remains uncontrolled and interest rate hikes continue, another brutal bear market inevitably lies ahead!
Holding more cash and adopting a wait-and-see stance is the best investment strategy for this year!
SVB was genuinely unable to withstand mounting pressure and sought to cut losses and protect itself—hence its announcement that selling part of its investment portfolio would incur an $1.8 billion loss, while simultaneously seeking to raise $2.25 billion via issuance of common and preferred shares. Had SVB not taken such action, persistent inflation could push interest rates above 6%, resulting in even larger losses and a far more severe liquidity crisis—a classic “cutting off limbs to save the body” maneuver.
Spotting one cockroach means the entire house is infested. SVB’s troubles are unlikely to remain isolated—it’s highly probable that most U.S. banks have already experienced varying degrees of liquidity stress. Thus, it’s not just SVB’s stock crashing—the stocks of other major U.S. banks are also plunging sharply. With SVB buckling under pressure and initiating self-rescue measures, other banks will follow suit. Such chain reactions only require one initial actor—and those who flee first suffer the least damage.
Although officials publicly declare that “no panic means no problem,” everyone knows that if you hold on while others sell at higher prices, you’ll still bear the losses yourself.
Just like during the pandemic when people rushed to hoard vegetables—if you believed supply was stable and chose not to join the rush, but others did, you’d end up with no vegetables while they secured theirs. Hoarding vegetables worsens scarcity, yet refusing to hoard won’t stop others from doing so. Ultimately, it becomes an unavoidable behavior forcing you to join the rush.
SVB has already bolted first and begun cutting losses—other banks will surely follow. Investors, too, will grow anxious and withdraw large sums from banks en masse, further exacerbating liquidity problems.
Equity and crypto markets face identical dynamics: massive investor selloffs of risk assets will occur. Saying “don’t withdraw funds,” “don’t sell stocks or crypto,” “the economy is fine,” or “banks are sound” is utterly futile.
The event has already occurred, and panic has set in—those who exit first stand to gain the most. Only after the crisis fully erupts—economic recession deepens, inflation eases, rate cuts commence, major corporations and institutions begin collapsing, and the U.S. equity market plummets catastrophically—should one consider re-entering to buy the bottom. That is the correct approach.
Rather than holding positions indefinitely and enduring massive asset depreciation—a principle Wall Street fully understands.
At their core, financial and debt crises remain crises of confidence.
Once confidence collapses and dominoes start falling, a “bomb” must inevitably detonate—and paradoxically, its explosion helps resolve the underlying issues. During the prior financial crisis, after Lehman Brothers collapsed and U.S. equities crashed, the economic crisis gradually subsided.
Conversely, the U.S.’s current hesitant, half-hearted approach to tackling inflation—prolonging rate hikes incrementally—means the longer the delay, the greater the eventual blowup. The more policymakers desperately try to prop up U.S. equities, the steeper the eventual crash. A hard economic landing now would actually accelerate resolution and minimize future “bombs.”
History teaches us one lesson repeatedly: humanity learns nothing from history. Past inflation-fighting efforts consistently prove that speed matters—the slower the response, the messier the outcome.
Top policymakers likely all hold stock positions and are desperate to avoid an equity crash—yet this delay will culminate in an extraordinarily spectacular implosion, potentially driving U.S. equities to unforeseen lows. From Credit Suisse to Blackstone’s commercial real estate exposure, and now SVB—the “bombs” are detonating one by one.
Capital markets will be turbulent this year—exercise extreme caution. Avoid full or oversized positions. If no major downturn occurs, prioritize holding cash and minimize exposure to risk assets. Adopting a wait-and-see posture is advisable. Black swan and gray rhino events will continue unfolding—avoid chasing highs, preserve cash. This remains the optimal investment strategy for 2023.