Chain Reaction - 13th March 2023
From Silvergate to Silicon Valley, what comes next?
Before we get to the negative parts of last week (big ones) in the news section, we’ll start off with events we saw. First up, was the International Women’s Day event run by Women in Blockchain. There were events all around the country and we had co-founder Mark, moderate an amazing panel of speakers in Sydney at Stone & Chalk.
We also saw Mark on the podcast with Bamboo (Craig and Tracey) for the Crypto Curious podcast where he got to speak about the CBDC pilot project, the CryptoTracker app they’ve built and more in the news with Silvergate. Check out the episode here https://equitymates.com/episode/69-is-there-a-silvergate-bank-run-plus-australian-cbdc-pilot-program-cryptocurrencys-role-in-aiding-earthquake-victims/
On Thursday there was the CryptoLulu event run by the team at NotCentralised and if you didn’t know, this is a bar/restaurant membership where NFT holders get physical perks. In addition, they’ll host some exclusive events so if folks are into networking, this could be right up their alley. Some highlights are here
They also featured in the Daily Telegraph last week too - check out the links here
First up, let’s look at the whole Silvergate (SI) and Silicon Valley Bank (SVB) implosions. In chronological order it was SI up first and a rundown on what that was all about is here from Coin Bureau. Basically, a lot of contagion risk hit many institutions that bank with Silvergate and utilise its SEN (Silvergate Exchange Network) to do real-time trading. A big problem in a 24/7 market to not have available. More here
Then later in week we saw the liquidity crunch announced with this Coindesk article https://www.coindesk.com/policy/2023/03/08/crypto-bank-silvergate-announces-voluntary-liquidation/
Then to top it off over, we saw SVB which had multiple issues lead to its collapse, from unhedeged positions on $91bn of mortgage-backed securities and a bank run from customers on top of an already $15bn hole in its balance sheet. The effect on crypto does not look good with one the biggest stablecoins, USDC (from Circle Ventures) with $9.8bn of exposure (it has $43bn market cap). https://www.coindesk.com/markets/2023/03/10/scrutiny-falls-on-43b-usdc-stablecoins-cash-reserves-at-failed-silicon-valley-bank/
Here’s an explainer here on Twitter
And some other tweets about the situation
Local startups also seem to be affected according to the AFR https://www.afr.com/technology/start-ups-pull-money-out-of-struggling-silicon-valley-bank-20230310-p5cr2u
That said, Robbie from IMX did calm investors showing they have no exposure to these issues
Circle, whose USDC stablecoin had exposure to SVB saw a depegging to 90 cents on $1 USD but that rallied back to 96/97 cents on news they would cover any shortfall https://www.coindesk.com/business/2023/03/11/circle-to-cover-any-shortfall-in-usdc-reserves-sparking-stablecoin-rally/
All of this was timely given that we saw Tom Mitchelhill highlight the different things that can cause a crypto crash in this article for The Chainsaw https://thechainsaw.com/defi/crypto/what-causes-crypto-crash-explained/
Also, we saw a large move off seized BTC in the US go to Coinbase which worried many investors, but it looks like it may just be government management of their crypto https://www.google.com/amp/s/www.fxstreet.com/amp/cryptocurrencies/news/silk-road-bitcoins-worth-1-billion-move-to-coinbase-another-sell-off-on-the-horizon-202303080614
For those into NFTs, check out the new newsletter from our resident NFT guru, Simo https://mirror.xyz/nft-syd.eth/Y-n98vux7PTEB_F47BQ1nJqSPvhYtp_MIVOhwpb8x_s
Also, we highlight this news article from community member Emina Besirevic on the Hermes case https://www.defi.org.au/post/it-s-in-the-bag-herm%C3%A8s-claims-victory-over-trade-mark-infringing-nft
Also this week we saw rates rise in the US affect both equities but also crypto too (given they're so correlated). But Powell did make mention of not wanting to stifle innovation https://cryptonews.com/news/federal-reserve-chairman-powell-speaks-out-we-dont-want-stifle-crypto.htm
Limited liability to DAO and Utah looks like the place to be as this new law passes https://cointelegraph-com.cdn.ampproject.org/c/s/cointelegraph.com/news/dao-gets-legal-recognition-in-the-us-as-the-utah-dao-act-passes/amp
Have you ever wondered about how crypto correlates with traditional equities? Well now you can with CryptoTracker. It's a free app from the NotCentralised crew which shows how different equities/ETFs trade against cryptocurrencies. They're trading quite similarly more recently as we can see below
There’s even this kind of situation where Ethereum is trading nearly 1 for 1 with Block Inc (which announced its focusing on bitcoin mining hardware)
You can try things out yourself here: https://tinyurl.com/cryptocurrencytracker
Anyway, with all the craziness going on, we’ll leave you with this thought puzzle from Lord Elon
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ABOUT AUS DEFI ASSOCIATION
The Australian DeFi Association (Aus DeFi) is a non-profit community organization dedicated to increasing education and awareness of blockchain technology, specifically decentralized finance (DeFi) and web3-based projects. Their goal is to empower the Australian community with the knowledge and tools to participate in the decentralized economy, and to promote the adoption and growth of blockchain technology in Australia. They strive to provide a more grassroots approach to promoting blockchain technology compared to other industry-focused organizations in Australia, and to provide a platform for community members to learn about and engage with this emerging technology.
You can watch our recorded meetups and interviews here on YouTube: https://www.youtube.com/@ausdefiassociation3956/videos