The Banks & USDC situation. My opinion

The truth is that the Feds clampdown on inflation caused this mess. They hiked interest rates and are determined to centralize crypto, as they want to control it. Hence, they push agendas like "ETH is a security."

Richard Heart @RichardHeartWin

#Ethereum is being attacked as a security in a new lawsuit against #Kucoin. ag.ny.gov/sites/default/… #ETH, $ETH

It's a mess, with a series of strikes hitting the crypto market.

This year alone

The DeFi Investor 🔎 @TheDeFinvestor

2023 so far: • regulators cracked down on BUSD • Kraken’s staking program shut down • Genesis filed for bankruptcy • Silvergate shut down • Silicon Valley Bank shut down • USAG sues KuCoin • USDC lost its peg Doesn't look much better than 2022...

Silvergate, an on/off ramp between fiat and crypto, shut down due to its large exposure to crypto. After the FTX disaster and a tough 2022 crypto market, withdrawals were significant, causing their balance sheets to go from $12B to $3.9B.

More info on this

Coinage @coinage_media

Silvergate, one of crypto's largest banks, just announced it's shutting down and liquidating all its assets to return customer deposits. The ripple effects for the crypto industry will be HUGE — and in a way, this is exactly what banks & the government wanted. A quick thread 🧵

My takeaway from this is that FTX was a nightmare, and a bank shouldn't have that much exposure to a particular sector. Also, keep an eye on Signature Bank, another on/off ramp crypto bank.

Now onto Silicon Valley Bank (SVB). High-interest rates led to a chain of events that resulted in SVB selling their assets to be liquid, so depositors can withdraw funds. Depositers noticed this issue, and it led to large-scale withdrawals that SVB couldn't handle.

More info on this

Genevieve Roch-Decter, CFA @GRDecter

Silicon Valley Bank $SIVB is in trouble. It sold off a $21 billion bond portfolio for a huge loss to shore up liquidity. The market is worried and the stock is down 54% today. Here’s what you should know 🧵

Michael Tan 🌱💵 @TheManMikeTan

Many of my startup friends see that I used to be an investment banker and have consequently asked me to explain to them what's going on with SVB as I would explain it to a 7 year old, so here goes:

It turns out that our stable coin Circle had some exposure to these two banks.

(Image)

$3.3b was in SVB, and now it cannot be withdrawn.

Ξ huf @hufhaus9

so many bad takes here on CT. - Circle foolishly put 8.25% of its USD reserves ($3.3bn/$40b) in a niche bank - now Circle don't have access to those funds as SBV is technically "insolvent" - i.e. SBV don't have enough cash or assets on hand to honor all requests for USD

I don't have data on how much is at Silvergate, but Circle had 26.4% exposure to these banks.

Dylan LeClair 🟠 @DylanLeClair_

26.4% of $USDC reserves are held by: Bank of New York Mellon, Citizens Trust Bank, Customers Bank, New York Community Bank, a division of Flagstar Bank, N.A., 𝐒𝐢𝐠𝐧𝐚𝐭𝐮𝐫𝐞 𝐁𝐚𝐧𝐤, 𝐒𝐢𝐥𝐢𝐜𝐨𝐧 𝐕𝐚𝐥𝐥𝐞𝐲 𝐁𝐚𝐧𝐤 and Silvergate Bank.

Dylan LeClair 🟠 @DylanLeClair_

Updated numbers as of March 2nd: $11.4b in banks out of $43.2b in reserves. 26.4% of $USDC reserves have exposure to U.S. banks. We know that $SI is winding down, but depositors could get out. So lets assume 1/7th of reserves in each bank... h/t @MikeBurgersburg https://t.co/zDGRSOgWzl

Are banks safe? Well, people say the feds will have to reduce interest rates for a cool-off, but who knows.

This calamity had an effect on $USDC, as it went down 14% in the early hours of today, even though it's a stablecoin.

Some traders took long and short positions, while USDC holders suffered losses due to the hit in $ value.

Now, no one knows for sure if USDC will re-peg, but you can make a bet and risk to earn.

The DeFi Investor 🔎 @TheDeFinvestor

Panic leads to huge opportunities. Some stablecoins non-related to USDC are currently trading at a discount. Here are some arbitrage opportunities and what to do if you have $USDC👇

Vitalik is betting on a USDC re-peg

Lookonchain @lookonchain

vitalik.eth(@VitalikButerin) exchanged 500 $ETH for 150,000 $RAI, then exchanged 150,000 $RAI for 400,359 $USDC and 27,179 $DAI. debank.com/profile/0xd8da… https://t.co/JgR8WBl5v6

List of institutions on a USDC bet

Lookonchain @lookonchain

How will Funds respond to the $USDC depegging? Panic selling $USDC or buying $USDC at the bottom? 1.🧵 Here are the operations of Funds👇 Hope it can be helpful to you.

Reasons why USDC might repeg

CryptoJoe @Crypto_Joe10

Why you should buy $0.90 for $1 A USDC 🧵

In my opinion, from the data I see, the exposure isn't that much, although it is still significant, but it can be managed. No one wants Circle to liquidate, as we saw what happened during the FTX crisis, even though it was a very different situation.

Elon Musk teased a potential SVB buyout.

Elon Musk @elonmusk

@minliangtan I’m open to the idea

A hit on USDC will affect DeFi, as most protocols' reserves are in USDC.

What's next? After this, a giga brain should create a 'truly' decentralized stablecoin, unaffected by any authority or market. Unregulated, truly decentralized, with reserves proofed by ZKP.

Circle Ceo says USDC will be redeemed for a 1:1 US dollar once banks open on Monday

Jeremy Allaire @jerallaire

Sharing an Update on USDC and Silicon Valley Bank.

circle.comAn Update on USDC and Silicon Valley BankIn a time of heightened uncertainty for the USDC economy, we remain committed to clear and transparent communication. As a regulated payment token, USDC will remain redeemable 1 for 1 with the U.S. Dollar.

Feds currently looking at a bailout option

*Walter Bloomberg @DeItaone

Federal authorities weigh safeguarding *all* SVB deposits: WAPO

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