The cryptocurrency crisis peaked early Saturday as the failure of Silicon Valley Bank (SVB) shut down some of the industry’s key plumbing.
After that, Treasury Secretary Janet Yellen convened Top financial regulators discuss SVB’s collapse. Shortly thereafter, crypto markets went into turmoil, entering an even darker phase of the more than year-long bear market.
There are echoes of the 2008 global financial crisis, with bad news followed by bad news. In the case of crypto, without 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 largely diverged from its intended price of $1 — a painful development for a product designed as a safe place for investors to park their money. The USDC/USDT pair (which tracks Circle’s coin and the larger coin issued by Tether) fell to $0.89 on the Kraken exchange at 03:49 UTC on Saturday — the lowest it’s ever been amid market pressure following the FTX debacle in November.
The financial services firm confirmed late Friday that about $3.3 billion in reserves backing the world’s second-largest stablecoin are tied up in SVB.
Stablecoins derive their value from those reserves; If it’s worth more than $43 billion — as the USDC was earlier on Friday — roughly that much money or cash-like fixed-income instruments must be stashed away somewhere. USDC’s market capitalization has now fallen below $40 billion.
Gas fees, a measure of how much it costs to complete an on-chain transaction, have increased. to Ethereum, average gas fee According to Nansen.ai, it rose to around 231 gwei against the roughly 20 to 40 range seen earlier on Friday.
Crypto was born in the wake of – and for some in response to – the 2008 crisis. Satoshi Nakamoto’s Bitcoin paper debuted in a world where governments propped up the financial system by dumping money. Crypto has no such centralized authority. The consequences are unclear if SVB customers, including Circle and its USDC stablecoin, are forced to take a haircut on their cash.
So who, if anyone, will get in?
When Razer CEO Min-Liang Tan tweeted late Friday that Twitter would buy SVB and turn it into a digital bank, the billionaire Elon Musk tweeted in response“I’m open to the idea.”