The cryptocurrency crisis came to a head early Saturday as the failure of the Silicon Valley Bank (SVB) disrupted some of the industry’s most basic plumbing.
in the aftermath, Treasury Secretary Janet Yellen met Top financial regulators to discuss SVB collapse. Soon after, the cryptocurrency market entered a turmoil, indicating that the bear market that had lasted for more than a year had entered a darker phase.
There are echoes of the 2008 global financial crisis, when bad news continued to follow even worse. Although in the case of cryptocurrency, which lacks a central bank like the Federal Reserve that can bail out the industry, the question remains: How will it end?
Circle Internet Financial’s USDC stablecoin has been significantly decoupled from its intended price of $1 – a shocking development for a product designed as a place for investors to park funds safely. the USDC/USDT pair (which tracks the Circle coin against the larger coin issued by Tether) fell to $0.869 on the Kraken exchange at 07:16 UTC on Saturday — far less than it ever got amid market stress following the FTX debacle in November. Returned about $0.94 as of 18:07 UTC.
The financial services firm confirmed late Friday that about $3.3 billion in reserves backing the world’s second-largest stablecoin was locked up in SVB.
Stablecoins derive their value from those reserves; If one is worth more than $43 billion – as USDC was earlier on Friday – there should be roughly that much cash or cash-like fixed income instruments stored somewhere to back it up. The USDC market capitalization has now fallen below $40 billion.
Gas fees, which measure the cost of completing an on-chain transaction, have risen sharply. to Ethereum, average gas fee It jumped as high as about 231 gui, as opposed to the roughly 20 to 40 gui seen earlier Friday, according to Nansen.ai.
Cryptocurrency was born in the aftermath of the 2008 crisis, and for some, in response to it. Satoshi Nakamoto’s bitcoin paper first appeared in a world where governments subsidized the financial system by pouring money into it. Cryptography lacks such a centralized authority. If SVB clients, including Circle and its USDC stablecoin, are forced to cut back on their funds, the repercussions are unclear.
So who, if anyone, will intervene?
When Razer CEO Min-Liang Tan tweeted late Friday that Twitter should buy SVB and turn into a digital bank, a billionaire Elon Musk tweeted in response“I am open to the idea.”
Update (March 11, 2023, 18:07 UTC): Updates pricing and adds DAI unbinding.
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