I read a report somewhere that NBA superstar Giannis Antetokoumpo has 50 different bank accounts with $250,000 each. This might seem weird at first glance, but perhaps further explanation will shed more light on this and justify the presumed paranoia. $250k is the Federal Deposit insurance corp limit in the U.S, so Giannis did that as a possible hedge against any possible collapse.

Smart Move?

Was it a smart move though? It was certainly a well thought out one if not anything, and it shows genuine concerns by the athlete not to lose his hard earned money in the face of a collapse. Perhaps coming from very humble background and seeing both wealth and poverty will make anyone paranoid, or perhaps it was just the best move a busy athlete could take to safeguard his finances.

With the recent collapse of Silicon valley Bank (SVB) and crypto bank Silvergate, it puts things into perspective just how exposed investors are to risk from the collapse of any major financial institution. It should be noted that SVB failed largely due to the failures of most of the VC led startups it funded, which accounted for its major business model.

From an investor perspective, keeping all your assets with SVB certainly would be disastrous at this time. There are limits to what the Federal Insurance Corp can cover and investors will almost certainly lose money. Worse still, the chances of a rebound are very slim in both the medium and long term.

Ripple Effects

The thing with a major financial institution collapse though is its tendency to drag the entire sector along with it. The financial sector is one of the most connected out there and most major companies work in collaboration with one another. Nearly everyone is smart enough to operate by the diversification principle so a major collapse has many of the companies exposed to an extent.

This is true in both the traditional space and the crypto space, and there is even a thinning of barriers between the traditional and crypto investments these days. USDC stablecoin was exposed to the SVB scandal, and led to another round of shock in the crypto space. A major banking collapse will for instance affect other banks, inevitably disrupting the "Giannis Model' of investment according to experts.

How then do We Invest Safely?

This is a million dollar question that experts have been trying to figure out over the years with some degree of success. For me though, there is really no true safety net in finance and we should always be paranoid. The focus should be on growing our assets as the biggest form of defense as nothing inevitably comes without risk.