Silicon Valley Bank (SVB), which has long played a similar role managing money for venture capital-funded startups, was shut down by state regulators Friday.

In broad strokes, both banks were undone by the same challenge: classic bank runs. Their erstwhile customers, whether crypto exchanges or tech startups, are facing broad business challenges thanks, in part, to economic and financial conditions. That has led to declining deposits and rising cash withdrawals at a time when a lot of the banks’ long-dated non-cash holdings were also being battered by the markets.

This week has seen major trouble for financial institutions tied to innovative and forward-looking sectors of the economy. Silvergate Capital, a holding company for a bank that since 2016 had bet big on servicing the emerging crypto economy, announced Thursday that it will wind down bank operations. Silicon Valley Bank (SVB), which has long played a similar role managing money for venture capital-funded startups, was shut down by state regulators Friday.

In broad strokes, both banks were undone by the same challenge: classic bank runs. Their erstwhile customers, whether crypto exchanges or tech startups, are facing broad business challenges thanks, in part, to economic and financial conditions. That has led to declining deposits and rising cash withdrawals at a time when a lot of the banks’ long-dated non-cash holdings were also being battered by the markets.

That meant when cash demands got high enough, Silvergate and Silicon Valley Bank had to sell those backing assets at substantial losses. Silvergate announced a $1 billion loss on the sale of assets in the fourth quarter of last year, while Silicon Valley Bank (with a larger overall balance sheet) also lost $1.8 billion while liquidating assets. In both cases, importantly, U.S. Treasury bonds made up large portions of the money-losing liquidations.

Silicon Valley Bank (SVB), which has long played a similar role managing money for venture capital-funded startups, was shut down by state regulators Friday.

In broad strokes, both banks were undone by the same challenge: classic bank runs. Their erstwhile customers, whether crypto exchanges or tech startups, are facing broad business challenges thanks, in part, to economic and financial conditions. That has led to declining deposits and rising cash withdrawals at a time when a lot of the banks’ long-dated non-cash holdings were also being battered by the markets.

This week has seen major trouble for financial institutions tied to innovative and forward-looking sectors of the economy. Silvergate Capital, a holding company for a bank that since 2016 had bet big on servicing the emerging crypto economy, announced Thursday that it will wind down bank operations. Silicon Valley Bank (SVB), which has long played a similar role managing money for venture capital-funded startups, was shut down by state regulators Friday.

In broad strokes, both banks were undone by the same challenge: classic bank runs. Their erstwhile customers, whether crypto exchanges or tech startups, are facing broad business challenges thanks, in part, to economic and financial conditions. That has led to declining deposits and rising cash withdrawals at a time when a lot of the banks’ long-dated non-cash holdings were also being battered by the markets.

That meant when cash demands got high enough, Silvergate and Silicon Valley Bank had to sell those backing assets at substantial losses. Silvergate announced a $1 billion loss on the sale of assets in the fourth quarter of last year, while Silicon Valley Bank (with a larger overall balance sheet) also lost $1.8 billion while liquidating assets. In both cases, importantly, U.S. Treasury bonds made up large portions of the money-losing liquidations.