Silicon Valley Bank (SVB) has experienced rapid developments in the past week, leading to stablecoins depegging, emergency plans by regulators, and concerns among depositors. Here’s an overview of the major events:
March 10: Silicon Valley Bank (SVB) shutdown by CFR
On March 10th, California’s financial regulator closed SVB following the announcement of a significant sale of assets and stocks to raise capital. The shutdown reason was unspecified, and the FDIC was appointed to protect insured deposits.
March 10: The world responds to SVB crisis
The Bank of England declared SVB UK’s cessation of payment and deposit acceptance. US depositors queued up to withdraw funds, with reports of FDIC considering covering 95% of uninsured SVB deposits.
March 11: Cryptocurrency market and industry impact
Circle, with $3.3 billion invested in SVB, faced stablecoin depegging, affecting USDC and causing a domino effect on other stablecoins. Circle pledged to cover the shortfall from SVB’s collapse.
Per CoinMarketCap, USDC has since pretty much repegged!
March 11: Contagion fears spread
The DeFi community felt the impact as large investors moved funds away from USDC. MakerDAO proposed an emergency plan to reduce exposure, and Curve Finance witnessed unprecedented trading activity.
March 12: Regulators begin to take action
US and UK regulators responded, with the Bank of London submitting a bid for SVB UK. Elon Musk expressed interest, and the Biden administration prepared to take “material action.”
March 12: Federal Reserve creates a $25b backstop for banks
The Federal Reserve unveiled the Bank Term Funding Program, a $25 billion initiative to provide loans to eligible institutions, serving as a backstop to ensure sufficient liquidity.
March 12: Federal Reserve states SVB depositors will be protected
Regulators announced “decisive measures” offering complete protection to SVB depositors, ensuring full access to funds starting March 13, with no losses to taxpayers.
March 13: Biden “firmly committed” to holding those responsible
President Biden expressed commitment to holding those responsible for the SVB collapse accountable and promised further details in a speech.
March 14: Bitcoin’s response
Bitcoin, created in response to the 2008 financial crisis, experienced a 25%+ rally across the weekend amid the unfolding banking crisis. If SVB gets bailed out, more people may lose confidence in the fiat system, potentially shifting towards Bitcoin.
Is this a beginning of a shift? Bitcoin may serve as a haven amidst banking uncertainties, especially if more banks face challenges.
Conclusion:
The rapid developments surrounding Silicon Valley Bank (SVB) have sent shockwaves through the financial and cryptocurrency sectors. As the crisis unfolded, the crypto community witnessed significant impacts, including stablecoins depegging and emergency responses from both regulators and industry leaders. Amidst these uncertainties, Bitcoin has shown resilience, rallying over 25% and potentially serving as a haven for those losing confidence in traditional banking systems.
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