• Silicon Valley Bank’s (SVB) failure caused some of the industry’s core plumbing to go haywire.
• Treasury Secretary Janet Yellen convened top financial regulators to discuss the collapse of SVB.
• USDC stablecoin massively depegged from its intended $1 price – a harrowing development for a product designed as a place for investors to safely park money.
Silicon Valley Bank Failure
The cryptocurrency crisis went into high gear early Saturday as Silicon Valley Bank’s (SVB) failure caused some of the industry’s core plumbing to go haywire. Stablecoin prices wildly swung and gas fees soared as investors scrambled to move money around hours after regulators shut SVB amid a run on the bank, which had ties to crypto. It was the second crypto-linked bank to go under this week.
Regulators Discuss Collapse
In the aftermath, Treasury Secretary Janet Yellen convened top financial regulators to discuss the collapse of SVB. Not long after, crypto markets went into turmoil, suggesting the more-than-year-long bear market has entered an even darker phase.
Stablecoin Price Swing
Circle Internet Financial’s USDC stablecoin massively depegged from its intended $1 price – a harrowing development for a product designed as a place for investors to safely park money. The USDC/USDT pair (which tracks Circle’s coin versus the bigger one issued by Tether) sank as low as 87 cents on the Kraken exchange at 07:16 UTC on Saturday – far lower than it ever got amid the market stresses that followed the FTX debacle in November. It was back around 94 cents as of 18:07 UTC.
Crypto Markets Turmoil
Crypto markets went into turmoil, suggesting the more-than-year-long bear market has entered an even darker phase with echoes of 2008 global financial crisis when bad news kept getting followed up by even worse news. Though in case of crypto, which lacks central bank like Federal Reserve that can bail out industry, question lingers: How will it end?
Reserves Backing Stablecoins
The financial services company confirmed late Friday that about $3.3 billion of the reserves backing their stablecoins were not held in their original accounts due to restrictions placed by banks and other financial service providers following SVB’s closure