The effect of SVB crash on the cryptocurrencies. Elon Musk says he's open to buy the bank

12 March 2023

Category

After 72 hours the Silicon Valley Bank crash, digital currencies, startups and financial credit are all connect in a huge "domino effect". The bank collapsed when 42 billion dollars in deposits went away and because of the rise in rates that knocked out its portfolio of government bonds. SVB bank was closed on Friday and commissioned by the Federal Deposit Insurance Corporation. The Fdic announced that from Monday deposits within the guaranteed threshold of 250 thousand dollars will be accessible to customers and that bank employees - writes Reuters - will have 45 working days. The Federal Deposit Insurance Corp now aims to find buyers for the group's various businesses and then return as much of the customers' money as possible.

Silicon Valley Bank crash is not just the biggest economic event after Lehman Brothers collapse in 2008, but is also the mirror through which we can see how cryptocurrencies have changed our economy for ever. "After the bank crash, the first consequences are for the digital currency USD , that loses its peg to the dollar, then the other problem is for startups which are left without salaries" (Il Sole 24 Ore)

The digital currencies risks

The stablecoin USD Coin (USDC) has fact lost its peg to the dollar after the collapse of Silicon Valley Bank. It happened after Circle, the company behind the digital currency, revealed that part of the reserves that guarantee the currency's peg to the dollar were right in the coffers of Silicon Valley Bank - Il Sole 24 Ore said - according to reports, of the $40 billion in reserves, $3.3 billion was in the failed bank. Thus, on hearing the news, the currency broke its parity with the dollar by one to one and dropped to $0.88, according to CoinGecko.

BlockFi, Circle, Avalanche and many others said they had exposure to Silicon Valley Bank, which prompted some of them to temporarily suspend their customers' withdrawals. However, Binance and Coinbase have decided to suspend the exchange of USDC, the stablecoin issued by Circle. From this we can tell that the cryptocurrency is still very tied to the traditional banking system, and that exposure to traditional banks can be a risk for cryptocurrency companies.

Elon Musk annoucement

A few hours ago also Elon Musk decide to take part in the debate. In a Twitter conversation about the bankruptcy, in fact, in response to a user who proposed that Twitter buy the bank, the billionaire replied: "I'm open to the idea". The proposal on Twitter was made by Min-Liang Tan, CEO of Razer, a company that sells gaming computers. "Twitter should buy Svb and become a digital bank," he wrote. With these words the billionaire was making just a provocation or not?

SOURCES:

Il Sole 24 Ore

Reuters

Ansa

Read also: https://themetaeconomist.com/silicon-valley-bank-bad-news/

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