The cryptocurrency crisis kicked into high gear on Saturday morning, as the collapse of Silicon Valley Bank (SVB) caused some of the company’s most successful ventures to collapse.
Stablecoin prices fluctuated sharply with rising gas prices as investors rushed to transfer cash hours after regulators shut down SVB among the run-of-the-mill banks, which have ties to crypto. It is the second crypto-linked bank to fail this week. Finally, Treasury Secretary Janet Yellen convened the central bank to discuss SVB’s failure.
In no time, the crypto market has gone into turmoil, suggesting that the year-plus bear market has entered the dark ages. There were echoes of the global financial crisis of 2008, when bad news continued to follow even more.
Although in the case of crypto, which does not have a central bank like the Federal Reserve that can bail out the company, the question remains: how will this end? Circle Internet Financial’s stablecoin USDC has been significantly removed from its forecast price of $1 – a devastating development for a product designed as a safe haven for investors to park their money.
The USDC/USDT version (which crosses the Circle coin to the largest Tether) fell to $0.89 on the Kraken exchange at 03:49 UTC on Saturday – much lower than it has been amid market tensions following the FTX debacle and November. The Financial Services Agency confirmed late Friday that approximately $3.3 billion of the securities backing the world’s second largest coin are locked in SVB.
Stablecoins derive their value from these securities; If someone is worth more than $43 billion – as the USDC was earlier on Friday – there will be something like a large currency or financial instrument invested as a hidden currency. USDC market capitalization has dropped below $40 billion.
USDT, meanwhile, at one time reached $ 1.06 on Kraken against the US dollar, a level that is almost not reached as investors seem to be transferring money to USDC. Bitcoin has risen.
Gas bills, which measure how much it costs to complete a transaction above, have increased. For Ethereum, the central gas price rose to around 231 gwei, from around 20-40 previously seen on Friday, according to Nansen.ai.
Crypto was born following – and, for some, in response – the 2008 crisis. The book Bitcoin by Satoshi Nakamoto started in a world where the government still supported the financial system by investing in it. Crypto has no such central authority. If SVB clients, including Circle and the USDC stablecoin, are forced to take a haircut on their funds, the outcome is unclear.
