Banks are facing more trouble due to the increasing prices of credit default swaps and decreasing treasury values. The Fed’s increase in rates and people withdrawing money from banks are causing small banks to borrow a lot from the Federal Reserve. Meanwhile, people are moving their deposits to larger banks, causing small bank deposits to fall. Reports on the end of the quarter will soon be released, and the market is expected to remain volatile. On Twitter, Polygon Labs announced the launch of Polygon ZK EVM Mainnet Beta, which will take Ethereum beyond the frontier of web3.
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The Troubled State of Banks
It seems like the banks are not out of trouble yet. According to recent economic data, more banks are facing difficulties due to the increasing rates set by the FED. This has caused the value of their treasuries to drop significantly, leading to many having to borrow from the FED. In the week ending March 15th, small US bank deposits fell by $120 billion as people continued to withdraw their money.
Despite regulators and state officials reassuring people that banks are fine, the market continues to price in uncertainty. Credit default swaps, which act as insurance against default, have been rapidly increasing in price, indicating that the market is losing faith in the banks. For example, Charles Schwab’s credit default swaps went from 70 to 124 in just a few months. Similarly, Deutsche Bank and Credit Suisse’s credit default swaps have seen sharp increases, with Credit Suisse’s going up by 5x in price.
The uncertainty surrounding the banking sector has caused even strong banks like Charles Schwab to be affected. The best option for investors is to tread carefully, especially if they have over $250 in a small bank. While there might be a good entry point at some point in the future, there is too much uncertainty in the market currently.
Upcoming Economic Data
This week, several economic data releases could impact the market. The GDP second revision, initial jobless claims, personal income, and personal spending will all be released on Friday. Additionally, the Fed’s preferred inflation gauge, PCE, will be released with the expected core PC value to be 0.4 percent. Inflation has shown signs of calming down, so we might see a drop in PCE this month.
Overall, the market is at a volatile point, with new information coming out daily. It is crucial to stay alert and informed about any new developments. Keeping an eye on the Patreon or following the right people on Twitter can help you get information quickly. Additionally, the crypto market landscape is constantly changing, with the launching of Polygon ZK EVM Mainnet beta in just two days.
