Bitcoin extended its slide on Tuesday, dropping more than $10,000 from its all-time high last week.

The flagship cryptocurrency was last lower by 5% at $63,460.33, according to Coin Metrics. Last week, it climbed to a record $73,679.

The move helped drag other cryptocurrencies lower. Ether lost more than 5% and was recently trading at $3,287.58 after topping $4,000 last week for the first time since December 2021, a drop some analysts predicted following the network’s Dencun upgrade. The token tied to Solana fell 8%, dogecoin lost 7% and XRP slipped 2%.

Among crypto-related stocks, bitcoin proxy MicroStrategy tumbled 10%, while crypto exchange Coinbase fell 5%. Mining stocks were down across the board, with the biggest ones, Riot Platforms and Marathon Digital, lower by 6% and 5%, respectively.

Bitcoin weakness began last week as traders started taking profits after it had soared roughly 70% from the start of the year to its peak last Wednesday. Data from CryptoQuant shows a massive spike in investors selling their bitcoin at a profit on March 12.

Additionally, that profit-taking led to a spike in long liquidations of leveraged bitcoin positions. About $122 million in long liquidations occurred across centralized exchanges on Monday, according to CoinGlass. Last week, there was about $372 million in long liquidations from Wednesday to Friday.

The successful introduction of spot bitcoin exchange-traded funds in the U.S. earlier this year has been a key contributor to bitcoin’s rally, which began even before the ETFs were launched in anticipation of their regulatory approval. At the same time, interest from investors and higher demand for bitcoin have also led to increased leverage and heightened high-frequency volatility.

Investors and analysts have warned that traders should exercise caution in March as more volatile price action, combined with an increase in trading volumes, would lead to pullbacks from bitcoin’s long-term uptrend.

Chart watchers have mostly said bitcoin is on a path to new highs but could also see steep corrections along the way.

The Toronto Stock Exchange’s parent company has already completed a major deal this year: its acquisition of ETF education company VettaFi.

According to TMX Group CEO John McKenzie, the deal helps expand its exchange-traded fund business globally.

“The exchange-traded fund is essentially one of the most important innovations in investing in the marketplace history — at least in the last 20 [to] 30 years,” McKenzie told CNBC’s “ETF Edge” this week. “What we were really looking to do is … get deeper into providing more support to our clients.”

Even though ETF activity has cooled off from its 2022 records, action in 2023 was still above previous years, according to iShares data.

McKenzie plans to utilize the VettaFi acquisition to facilitate more ETF creation.

“ETF providers can create new products and great solutions so that they can reach a broader investing audience,” McKenzie said. “That’s the one two punch of what we’re doing with that investment.”

TMX’s ETF Screener lists 1,264 ETFs and ETF-related funds on the Toronto Stock Exchange as of Friday.

With VettaFi in the exchange’s tool belt, McKenzie hopes to create new ETFs focusing on Canada’s economic strengths and how they can reach international investors.

“We want to be more global than local,” added McKenzie. “This is a great asset to help us build not just in the U.S., not just in Canada, but around the world.”

Since the acquisition was completed on Jan. 2, TMX shares are up 11%.

Disclaimer

Dan Hornberger has been a fan of the National Football League’s Philadelphia Eagles for as long as he can remember. As an adult, his office has team memorabilia lining the walls.

Last year, the devout supporter went to five home games, about an hour-and-a-half drive from his house. This year, however, Hornberger’s only on track to attend two games as costs soar.

“I’m a huge fan,” Hornberger, 40, said. “Ultimately, what it comes down to is just outright refusal on my part to pay those kinds of prices.”

Sports prices have surged this fall, according to federal data. That’s made game tickets the latest victim of “funflation,” a term used by economists to explain the increasing price tags of live events as consumers hanker for the experiences they lost during the pandemic.

Admission prices for sporting events jumped 25.1% in October 2023 from the same month a year prior, according to the Bureau of Labor Statistics’ consumer price index data. The category saw the highest annualized inflation rate out of the few hundred that make up the inflation gauge.

CPI as a whole rose a relatively modest 3.2% on an annualized basis. The index tracks the prices of a broad basket of items including milk, jewelry and airline fares.

“We’ve seen this through the entire leisure and hospitality sector,” said Victor Matheson, a professor and sports economist at the College of the Holy Cross. “People are getting back to things that they enjoy doing and are willing to pay a bunch.”

Part of the reason consumers may be seeing higher ticket prices for their favorite sports teams is because of the increasing use of dynamic pricing models, Matheson said. These structures allow ticket-selling platforms to fetch more or less per ticket, depending on demand for the event at any given moment.

There’s also an alignment of attention-grabbing sporting events taking place this fall. Beyond the typical major-league seasons, the Formula One race in Las Vegas last week and the announcement of soccer legend Lionel Messi’s move to the Inter Miami team this summer have boosted enthusiast spending.

But a large reason for the eye-popping 25.1% jump is because of how low prices were a year ago, Matheson said. Teams slashed ticket values in 2022 in a bid to win back fans who had grown accustomed to watching at home.

Sports ticket prices were 14.2% higher in October than in November 2019, a smaller gain than the entire index’s 19.6% increase, a CNBC analysis of CPI data shows. Much of the upward pressure on admission costs has come this year, underscoring the role of funflation as consumers shift their attention from Taylor Swift and Beyoncé concerts to NFL and Major League Baseball games.

“We’re seeing a gigantic bounce back in prices,” Matheson said. 

NFL and National Hockey League sales have approximately doubled in 2023 compared with the prior year, according to ticket platform StubHub. NBA sales were up nearly 60% at the start of the season compared with the last, while college football has seen an increase of around 50%.

To be sure, not every sport this year has seen the same price growth. StubHub said ticket prices across the top 10 sporting events were 15% higher in 2022 than they were in 2023.

Matheson said tamer inflation overall should help cool sector-specific growth. A return to a more normalized entertainment spending routine following the post-pandemic experience boom can also help quell demand and prices, he added.

Rodney Paul, director of the sports analytics program at Syracuse University, said interest in attending games should be somewhat stable even if the economy worsens. That’s because a sizable portion of the consumer base is well-off enough to afford pro-sports tickets — which he said is essentially a luxury item — and should be able to better weather a downturn given their financial status.

But Paul said a meaningful change to the state of the economy could push fans who are less financially stable to cut back on extraneous expenses, in turn hurting demand. Cash-strapped consumers may justify spending more than they’d like to this year by reminding themselves they didn’t splurge as much or at all on game tickets during the pandemic, Matheson said.

Part of the financial stress comes from the resale market for tickets, some sports enthusiasts say. The rising price of parking and food inside of the stadium also have to be factored in to the financial calculation of fans such as Hornberger and Sara Weddington.

Weddington was able to save enough enough to attend a Kansas City Chiefs game last season, but she said it feels out of the question this year as prices have climbed. The long-time resident of the Kansas City area said she feels for people who have never gotten to see a game before recent cost increases.

“To have such a monumental part of the community be so out of reach for a lot of people is really upsetting,” the 23-year-old said. “Not being able to go to a game is like going to a candy store and not being able to get any candy.”

Still, Paul of Syracuse University said sports have taken on a new meaning in the post-pandemic world. As people increasingly work from home, he said there’s a larger need for in-person social spaces — and those who can afford it are more willing to shell out.

“There’s a real craving for that kind of feeling of togetherness that the sports world brings,” he said. It’s “a really exciting experience that maybe is even more exciting now because people had lost it in the past.”

— CNBC’s Gabriel Cortes contributed to this report.

LONDON — The Bank of England is widely expected to keep interest rates unchanged on Thursday, as data continues to show moderating price pressures and weakening economic activity.

As of Thursday morning in London, the market was pricing around an 89% probability of a second consecutive hold, after the Bank ended a run of 14 straight hikes in September with a surprise 5-4 vote among members of the Monetary Policy Committee.

U.K. inflation came in at 6.7% in September, unchanged from the previous month and considerably higher than in other G7 economies. Britain’s inflation remains on a general downward trajectory.

Meanwhile, recent PMI data points to a soft economic growth outlook, while the labor market, a key indicator for the MPC, has shown signs of loosening.

The S&P Global/CIPS flash PMI (purchasing managers’ index) reading for October reflected that business activity decreased for the third straight month in October and posted its largest monthly decline since January, recording lower output in both the manufacturing and services sectors.

New work and backlogs of work declined, suggesting a lack of pressure on business capacity, while private sector employment fell for the second month in a row and lower confidence in the year-ahead business outlook resulted in hiring freezes. Business optimism sank to its lowest point in 2023, the S&P Global report said.

“U.K. economic activity appears to have slowed further, the housing market is weaker, consumer spending is falling, and inflationary pressure is showing further signs of dissipating. It’s only wage growth that has surprised to the upside, but this is unlikely to persist given other indicators of labour market weakness,” said Mike Riddell, head of macro unconstrained at Allianz Global Investors, on Tuesday via email.

The firm agrees with market consensus that rates will stay on hold.

“No doubt the BoE will signal that rates can still rise if economic data indicates a need, but as voting member Swati Dhingra recently highlighted, the long lags between changes in monetary policy and their impact on the economy mean that only up to a quarter of all the BoE hikes in this cycle have made a dent on the UK economy so far,” Riddell said.

He added that the MPC will be keen to keep its options open but will for now want to wait and observe how much pain prior hikes inflict on the economy.

In a research note on Tuesday, Barclays another rate hold is all but guaranteed, given a softer-than-expected data flow compared to the MPC’s last set of projections in August, along with the surprise pause in September, when the economy was “if anything, slightly less weak than now.”

The British lender sees the U.K. central bank rate remaining at 5.25% until August 2024, before the first of an expected four 25 basis point cuts.

“We expect that the data-dependent guidance is unlikely to change, with the MPC preserving, at least in theory, the possibility of further hikes in order to prevent expectations of cuts being brought further forward,” said Barclays economist Abbas Khan.

“In terms of the vote split, we expect a 1-6-2 outcome (-25bp/hold/+25bp respectively), with external member Dhingra voting for a cut (which would be the first time a committee member has voted to lower rates in this hiking cycle), and with external members Haskel and Mann voting for a 25bp hike.”

Markets not expecting rates below 4% ‘ever again’

While the MPC’s Dhingra noted the need to assess the lagging impact of monetary tightening, fellow member Catherine Mann said that she was still concerned about persistent rises in the cost of living in the U.K. With annual CPI unchanged in the last print, there could be no guarantees that the Bank has finished hiking.

Central banks will now be wary of fresh upside risks to energy prices and supply chains, if the Israel-Hamas conflict envelopes the wider region.

Markets are not pricing any further hikes, but Allianz’s Riddell highlighted that only a few further gradual cuts are expected from August 2024 over the subsequent few years and said it was “striking that the market’s central case is for the BoE to not cut interest rates below 4% ever again.”

“The only way that we can rationalise this is if U.K. inflation remains stuck at 3% or higher forever, and/or the U.K. economy avoids a meaningful recession,” he said.

“But the spare capacity that is set to be created following the very aggressive rates hikes of the last year leads us to conclude that the hit to U.K. growth is likely to be far greater than markets are currently discounting, and inflation pressure ought to therefore quickly subside through this year and especially into next year.”

Central banks around the world are reaching a pivotal stage, as they near the end of lengthy monetary tightening cycles, following significant progress in wrestling down sky-high inflation.

The U.S. Federal Reserve will announce its latest monetary policy decision on Wednesday and is also expected to leave rates on hold in light of recent economic data and a spike in U.S. Treasury yields.

The European Central Bank last week held rates steady at their current record high of 4%, ending a run of 10 straight hikes.

As concerns mount over rising interest rates and inflation levels, billionaire investor Ray Dalio says he prefers to hold cash for now, not bonds.

“I don’t want to own debt, you know, bonds and those kinds of things,” the founder of Bridgewater Associates said when asked how he would deploy capital in today’s investment environment.

“Temporarily, right now, cash I think is good … and the interest rates are fine. I don’t think [it] will be sustained that way,” Dalio told an audience at the Milken Institute Asia Summit in Singapore on Thursday.

Dalio’s comments come as the yield on the 30-day U.S. Treasury bill climbs above 5% while investors can get 4% on certificates of deposit and high-yield savings accounts.

Dalio says the biggest mistake that most investors make is “believing that markets that performed well are good investments, rather than more expensive.”

When asked how a new industry watcher should deploy capital, Dalio’s advice was: Be in the right geographies, diversify, pay attention to the implications of disruptions and pick asset classes that are creating new technologies and using them “in the best possible way.”

Touching on how to address the rising global debt, the hedge fund manager pointed out that when debt accounts for a substantial share of a country’s economy, the situation “tends to compound and accelerate … because you have to have interest rates that are high enough for the creditor and not so high that they are harming the debtor.”

“We’re at that turning point of acceleration. But the real problem comes when individuals or investors don’t hold the bonds, because it comes as a supply-demand, one man’s debts or another man’s assets,” he explained.

Dalio cautioned that investors will sell their bonds if they are not receiving real interest rates that are high enough.

“The supply-demand [imbalance] isn’t just the amount of new bonds. It’s the issue of ‘do you choose to sell the bonds?'” he explained.

When there’s a sell-off in bonds, prices fall and yields rise, as they have an inverse relationship. As a result, borrowing costs will increase and drive up inflationary pressure, thereby posing an uphill task for central banks.

“When the interest rates go up, the central bank then has to make a choice: Do they let them go up and have the consequences of that, or do they then print money and buy those bonds? And that has inflationary consequences,” Dalio explained.

“We’re seeing that dynamic happen now. I personally believe that the bonds longer term are not a good investment,” he stressed.

The market has long been pricing in interest rate cuts from major central banks toward the end of 2023, but sticky core inflation, tight labor markets and a surprisingly resilient global economy are leading some economists to reassess.

Stronger-than-expected U.S. jobs figures and gross domestic product data have highlighted a key risk to the Federal Reserve potentially taking its foot off the monetary brake. Economic resilience and persistent labor market tightness could exert upward pressure on wages and inflation, which is in danger of becoming entrenched.

The headline U.S. consumer price index has cooled significantly since its peak above 9% in June 2022, falling to just 4.9% in April, but remains well above the Fed’s 2% target. Crucially, core CPI, which excludes volatile food and energy prices, rose by 5.5% annually in April.

As the Fed earlier this month implemented its 10th increase in interest rates since March 2022, raising the Fed funds rate to a range of 5% to 5.25%, Chairman Jerome Powell hinted that a pause in the hiking cycle is likely at the FOMC’s June meeting.

However, minutes from the last meeting showed some members still see the need for additional rises, while others anticipate a slowdown in growth will remove the need for further tightening.

Fed officials including St. Louis Fed President James Bullard and Minneapolis Fed President Neel Kashkari have in recent weeks indicated that sticky core inflation may keep monetary policy tighter for longer, and and that more hikes could be coming down the pike later in the year.

The personal consumption expenditures price index, a preferred gauge for the Fed, increased by 4.7% year-on-year in April, new data showed Friday, indicating further stubbornness and triggering further bets on higher for longer interest rates.

Several economists have told CNBC over the past couple of weeks that the U.S. central bank may be forced to tighten monetary policy more aggressively in order to make a breakthrough on stubborn underlying dynamics.

According to CME Group’s FedWatch tool, the market currently places an almost 35% probability on the target rate ending the year in the 5% to 5.25% range, while the most likely range by November 2024 is 3.75% to 4%.

Patrick Armstrong, chief investment officer at Plurimi Group, told CNBC last week that there was a double-sided risk to current market positioning.

“If Powell cuts, he probably cuts a lot more than the market’s pricing, but I think there is above 50% chance where he just sits on his hands, we get through year-end,” Armstrong said.

“Because services PMI is incredibly strong, the employment backdrop incredibly strong, consumer spending all strong — it’s not the kind of thing where the Fed really needs to pump liquidity out there unless there is a debt crisis.”

European slowdown

The European Central Bank faces a similar dilemma, having slowed the pace of its hiking increments from 50 basis points to 25 basis points at its May meeting. The bank’s benchmark rate sits at 3.25%, a level not seen since November 2008.

Headline inflation in the euro zone rose in April to 7% year-on-year, though core price growth posted a surprise slowdown, prompting further debate as to the pace of rate rises the ECB should be adopting as it looks to bring inflation back to Earth.

The euro zone economy grew by 0.1% in the first quarter, below market expectations, but Bundesbank President Joachim Nagel said last week that several more rate hikes will be needed, even if that tips the bloc’s economy into recession.

“We are in a not at all easy phase, because inflation is sticky and it’s not moving as we would all hope it would, so it’s quite important as Joachim Nagel said today that the ECB stays open for further rate hikes as long as it needs until the drop-off is done,” former Bundesbank executive board member Andreas Dombret told CNBC last week.

“Of course, this will have negative implications and negative effects on the economy too, but I strongly believe that if you let inflation [de-anchor], if you let inflation go, those negative effects will be even higher, so it is very important for the credibility of the ECB that the ECB stays the course.”

The Bank of England

The U.K. faces a much tougher inflation challenge than the U.S. and the euro zone, and the U.K. consumer price inflation rate fell by less than expected in April.

The annual consumer price index dropped from 10.1% in March to 8.7% in April, well above consensus estimates and the Bank of England’s forecast of 8.4%. Meanwhile core inflation jumped to 6.8% from 6.2% in March, which will be of greater concern to the Bank’s Monetary Policy Committee.

With inflation continuing to prove stickier than the government and the central bank had hoped, now almost double the comparable rate in the U.S. and considerably higher than in Europe, traders increased bets that interest rates will need to be hiked further in order to curtail price rises.

“Supply shocks, still de-anchored inflation expectations, fewer promotional discounting, and some potential margin building are likely keeping prices from normalising as quickly as traditional models would imply,” explained Sanjay Raja, chief U.K. economist at Deutsche Bank.

“We now expect a slower descent to target, and with price and wage inflation now likely to remain stronger than anticipated, we raise our terminal rate forecast to 5.25%. Risk management considerations will, we think, force the MPC to push rates higher and further than previously intended.”

Deutsche Bank now sees monetary policy shifting “firmly” toward a “higher for longer” era, Raja added.

The market is now pricing a 92% chance of a further 25 basis point rate hike from the Bank of England at its June meeting to take the main bank rate to 4.75%, according to Refinitiv data on Friday afternoon.

But despite the expectations for rates to rise further for longer, many economists still see a full reversal of course before the end of this year.

Berenberg had previously projected three cuts by the end of 2023, but cut this down to one in response to last week’s inflation print.

The German bank kept its end-2024 call for a 3% rate unchanged, projecting six 25 basis point cuts over the course of next year, but also put a 30% probability on a further 25 basis point hike in August to take the bank rate to 5%.

“Policy changes operate with uncertain effects and variable lags. As a consequence of the shift away from floating-rate mortgages towards fixed products over the past decade, the pass-through of monetary policy to consumption via the housing market takes longer than in the past,” said Berenberg Senior Economist Kallum Pickering.

“This highlights the risk that, if the BoE overreacts to near-term inflation surprises, it may set the stage for a big inflation undershoot once the full effects of its past policy decisions play out.”

The run on Silicon Valley Bank’s deposits this month went far deeper than was initially known.

Since the day regulators seized SVB, it was public knowledge that panicked customers withdrew $42 billion from the bank on March 9 on concerns that uninsured deposits were at risk.

Follow CNBC’s live coverage of the SVB hearing

But that pales in comparison to what would’ve gone out the next day, Michael Barr, vice chair for supervision at the Federal Reserve, testified Tuesday before the Senate Banking Committee. Regulators shuttered SVB on March 10 in the biggest bank failure since the 2008 financial crisis.  

“That morning, the bank let us know that they expected the outflow to be vastly larger based on client requests,” Barr said. “A total of $100 billion was scheduled to go out the door that day.”

The combined withdrawal figure of $142 billion represents a staggering 81% of SVB’s $175 billion in deposits as of the end of last year. The dizzying pace at which money left SVB shows how quickly bank runs can happen when social media heightens panic and online banking allows for quick transactions.

Lawmakers summoned top U.S. banking regulators to Washington to explain why Silicon Valley Bank and Signature Bank collapsed earlier this month. Barr and others pointed to mismanagement by bank executives, and noted that banks with assets of more than $100 billion may need stricter rules. The former CEOs of the banks did not attend.

In fact, Fed supervisors began warning SVB management about the risk that higher interest rates posed to the bank’s balance sheet in November 2021, Barr testified. The bank “failed to address” Fed concerns in a timely way, exposing the company to its deposit run this month.

SVB’s final days as an independent bank were a roller coaster of emotions. After SVB management “spooked” investors and customers with its “belated” attempt to raise capital late Wednesday, March 8, the situation appeared to have calmed early Thursday, Barr testified.

“But later Thursday afternoon, deposit outflows started and by Thursday evening, we learned that more than $42 billion, as you indicated, had rushed out of the bank,” he said.

Fed staff worked around the clock on March 9 to save the bank, searching for enough collateral to borrow additional billions of dollars from the Fed’s discount window to honor withdrawal requests, Barr said.

The morning SVB was seized, regulators believed they may have solved the bank’s shortfall, only to run into a $100 billion wall of withdrawals.

“They were not able to actually meet their obligations to pay their depositors over the course of that day and they were shut down,” Barr said.

The surge of deposits moving from smaller banks to big institutions including JPMorgan Chase and Wells Fargo amid fears over the stability of regional lenders has slowed to a trickle in recent days, CNBC has learned.

Uncertainty caused by the collapse of Silicon Valley Bank earlier this month triggered outflows and plunging share prices at peers including First Republic and PacWest.

related investing news

The situation, which roiled markets globally and forced U.S. regulators to intervene to protect bank customers, began improving around March 16, according to people with knowledge of inflows at top institutions. That’s when 11 of the biggest American banks banded together to inject $30 billion into First Republic, essentially returning some of the deposits they’d gained recently.

“The people who panicked got out right away,” said the person. “If you haven’t made up your mind by now, you are probably staying where you are.”

The development gives regulators and bankers breathing room to address strains in the U.S. financial system that emerged after the collapse of SVB, the go-to bank for venture capital investors and their companies. Its implosion happened with dizzying speed this month, turbocharged by social media and the ease of online banking, in an event that’s likely to impact the financial world for years to come.

Within days of its March 10 seizure, another specialty lender Signature Bank was shuttered, and regulators tapped emergency powers to backstop all customers of the two banks. Ripples from this event reached around the world, and a week later Swiss regulators forced a long-rumored merger between UBS and Credit Suisse to help shore up confidence in European banks.

The dynamic has put big banks like JPMorgan and Goldman Sachs in the awkward position of playing multiple roles simultaneously in this crisis. Big banks are advising smaller ones while participating in steps to renew confidence in the system and prop up ailing lenders like First Republic, all while gaining billions of dollars in deposits and being in the position of potentially bidding on assets as they come up for sale.

The broad sweep of those money flows are apparent in Federal Reserve data released Friday, a delayed snapshot of deposits as of March 15. While large banks appeared to gain deposits at the expense of smaller ones, the filings don’t capture outflows from SVB because it was in the same big-bank category as the companies that gained its dollars.

Although inflows into one top institution have slowed to a “trickle,” the situation is fluid and could change if concerns about other banks arise, said one person, who declined to be identified speaking before the release of financial figures next month. JPMorgan will kick off bank earnings season on April 14.

At another large lender, this one based on the West Coast, inflows only slowed in recent days, according to another person with knowledge of the matter.

JPMorgan, Bank of America, Citigroup and Wells Fargo representatives declined to comment for this article.

The moves mirror what one newer player has seen as well, according to Brex co-founder Henrique Dubugras. His startup, which caters to other VC-backed growth companies, has seen a surge of new deposits and accounts after the SVB collapse.

“Things have calmed down for sure,” Dubugras told CNBC in a phone interview. “There’s been a lot of ins and outs, but people are still putting money into the big banks.”

The post-SVB playbook, he said, is for startups to keep three to six months of cash at regional banks or new entrants like Brex, while parking the rest at one of the four biggest players. That approach combines the service and features of smaller lenders with the perceived safety of too-big-to-fail banks for the bulk of their money, he said.

“A lot of founders opened an account at a Big Four bank, moved a lot of money there, and now they’re remembering why they didn’t do that in the first place,” he said. The biggest banks haven’t historically catered to risky startups, which was the domain of specialty lenders like SVB.

Dubugras said that JPMorgan, the biggest U.S. bank by assets, was the largest single gainer of deposits among lenders this month, in part because VCs have flocked to the bank. That belief has been supported by anecdotal reports.

For now, attention has turned to First Republic, which has teetered in recent weeks and whose shares have lost 90% this month. The bank is known for its success in catering to wealthy customers on the East and West coasts.

Regulators and banks have already put together a remarkable series of measures to try to save the bank, mostly as a kind of firewall against another round of panic that would swallow more lenders and strain the financial system. Behind the scenes, regulators believe the deposit situation at First Republic has stabilized, Bloomberg reported Saturday.

First Republic has hired JPMorgan and Lazard as advisors to come up with a solution, which could involve finding more capital to remain independent or a sale to a more stable bank, said people with knowledge of the matter.

If those fail, there is the risk that regulators would have to seize the bank, similar to what happened to SVB and Signature, they said. A First Republic spokesman declined comment.

While the deposit flight from smaller banks has slowed, the past few weeks have exposed a glaring weakness in how some have managed their balance sheets. These companies were caught flat-footed as the Fed engaged in its most aggressive rate hiking campaign in decades, leaving them with unrealized losses on bond holdings. Bond prices fall as interest rates rise.

It’s likely other institutions will face upheaval in the coming weeks, Citigroup CEO Jane Fraser said during an interview on Wednesday.

“There could well be some smaller institutions that have similar issues in terms of their being caught without managing balance sheets as ably as others,” Fraser said. “We certainly hope there will be fewer rather than more.”

On Wednesday, Silicon Valley Bank was a well-capitalized institution seeking to raise some capital.

Within 48 hours, a panic induced by the very venture capital community that SVB had served and nurtured ended the bank’s 40-year-run.

Regulators shuttered SVB Friday and seized its deposits in the largest U.S. banking failure since the 2008 financial crisis and the second-largest ever. The company’s downward spiral began late Wednesday, when it surprised investors with news that it needed to raise $2.25 billion to shore up its balance sheet. What followed was the rapid collapse of a highly-respected bank that had grown alongside its technology clients.

Even now, as the dust begins to settle on the second bank wind-down announced this week, members of the VC community are lamenting the role that other investors played in SVB’s demise.

“This was a hysteria-induced bank run caused by VCs,” Ryan Falvey, a fintech investor of Restive Ventures, told CNBC. “This is going to go down as one of the ultimate cases of an industry cutting its nose off to spite its face.”

The episode is the latest fallout from the Federal Reserve’s actions to stem inflation with its most aggressive rate hiking campaign in four decades. The ramifications could be far-reaching, with concerns that startups may be unable to pay employees in coming days, venture investors may struggle to raise funds, and an already-battered sector could face a deeper malaise.

The roots of SVB’s collapse stem from dislocations spurred by higher rates. As startup clients withdrew deposits to keep their companies afloat in a chilly environment for IPOs and private fundraising, SVB found itself short on capital. It had been forced to sell all of its available-for-sale bonds at a $1.8 billion loss, the bank said late Wednesday.

The sudden need for fresh capital, coming on the heels of the collapse of crypto-focused Silvergate bank, sparked another wave of deposit withdrawals Thursday as VCs instructed their portfolio companies to move funds, according to people with knowledge of the matter. The concern: a bank run at SVB could pose an existential threat to startups who couldn’t tap their deposits.

SVB customers said they didn’t gain confidence after CEO Greg Becker urged them to “stay calm” in a call that began Thursday afternoon, and the stock’s collapse continued unabated, reaching 60% by the end of regular trading. Importantly, Becker couldn’t assure listeners that the capital raise would be the bank’s last, said a person on the call.

All told, customers withdrew a staggering $42 billion of deposits by the end of Thursday, according to a California regulatory filing.

By the close of business that day, SVB had a negative cash balance of $958 million, according to the filing, and failed to scrounge enough collateral from other sources, the regulator stated.

By Friday, as shares of SVB continued to sink, the bank ditched efforts to sell shares, CNBC’s David Faber reported. Instead, it was looking for a buyer, he reported. But the flight of deposits made the sale process harder, and that effort failed too, Faber said.

Friday evening, some SVB customers received emails assuring them that it was “business as usual” at the bank.

“I’m sure you’ve been hearing some buzz about SVB in the markets today so wanted to reach out to provide some context,” one SVB banker wrote to a client, according to a copy obtained by CNBC.

“It is business as usual at SVB,” the banker wrote. “Understandably there may be questions and I want to make myself available if you have any concerns.”

Falvey, a former SVB employee who launched his own fund in 2018, pointed to the highly interconnected nature of the tech investing community as a key reason for the bank’s sudden demise. Prominent funds including Union Square Ventures and Coatue Management blasted emails to their entire rosters of startups in recent days, instructing them to pull funds out of SVB on concerns of a bank run. Social media only heightened the panic, he noted.

“When you say, `Hey, get your deposits out, this thing is gonna fail,” that’s like yelling fire in a crowded theater,” Falvey said. “It’s a self-fulfilling prophecy.”

Falvey, who started his career at Wells Fargo and consulted for a bank that was seized during the financial crisis, said that his analysis of SVB’s mid-quarter update gave him confidence. The bank was well capitalized and could make all depositors whole, he said. He even counseled his portfolio companies to keep their funds at SVB as rumors swirled.

Now, thanks to the bank run that ended in SVB’s seizure, those who remained with SVB face an uncertain timeline for retrieving their money. While insured deposits are expected to be quickly available, the lion’s share of deposits held by SVB were uninsured, and its unclear when they will free up.

“The precipitous deposit withdrawal has caused the Bank to be incapable of paying its obligations as they come due,” the California financial regulator stated. “the bank is now insolvent.”