After Silvergate and Signature Bank collapsed late last month, First Republic Bank (FRC) now faces a similar fate as it’s left with limited options to turn its business around. With fear spreading across the States and beyond, it may soon become the third major bank to fail this year. This new development comes after the lender disclosed today that it had lost close to $100 billion in deposits during last month’s banking crisis.
First Republic Bank Fears Collapse
According to recent statements released by the financial institution, First Republic is attempting to unload between $50 billion and $100 billion in debt instruments as part of its “strategic options” to resolve the massive capital outflow. However, the White House is still uncertain and concerned whether it has the bandwidth to find a way out from insolvency and as reported by Financial Times, noted officials from the Biden Administration, the Federal Reserve, and the Treasury Department met with the bank’s top executives in the past few days.
Moreover, according to reputed Fox journalist Charles Gasparino, bankers working at First Republic Bank claim that the government would take over the failing bank through “receivership” — similar to bankruptcy in the private sector — after the bank exhausted all alternatives including asset sales and finding a buyer, all of which appear to be challenging at the moment. “Officials at the big banks believed the Feds were poised last week to take over FRC just before its earnings announcement crushed shares”, he further added.
SCOOP (1/2): Bankers working w @firstrepublic bank say they expect eventual govt receivership for the ailing bank after it exhausts private sector solutions such as asset sales and finding a buyer, both of which appear difficult. Officials at the big banks believed the Feds were
— Charles Gasparino (@CGasparino) April 25, 2023
FRC Stock Drops While Bitcoin’s Price Rise
In light of this news, the shares of First Republic plummeted to an all-time low in Tuesday’s trading session. Over 49% of the stock price was wiped off, bringing the total loss for the year to over 90%. The price per share hit an all-time low of $8.10 as the markets closed.
This has given rise to concerns regarding the volatility of the stock market as well as the cryptocurrency market. While the U.S. stock market exerted a mixed reaction to the news, Bitcoin, on the other hand, rose by about 1.5%. Given Bitcoin’s meteoric price rise during the last American banking crisis, market participants and the larger crypto community expect a similar trend in the event of the banking giant’s failure.
The price of Bitcoin has been on a downward spiral for the past few days, falling from $30,000 all the way down to $26,000. But with the news of another banking collapse, it could reignite the key principle of Bitcoin being a worthy alternative to the banking industry. In fact, this did play a role in Bitcoin’s early runup when Silvergate and Signature Bank — two crypto-friendly institutions — failed horribly last month.
As things currently stand, Bitcoin’s price is exchanging hands at $28,012.54 which represents a gain of 1.61% over the past one hour in comparison to a loss of 7.63% recorded over the past seven days.
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