Crypto Fundamentals #019

GM to everyone this Friday - it’s been a brutal week for the broader tech and VC industry and we hope everyone is making it through OK🫡. This week’s update will be short and sweet 🧁

here’s what happened this week in crypto 👇

🪦 RIP Silicon Valley Bank

🤔 Open questions about USDC and reserves at SVB?

🫣 Binance suspends auto-conversion of USDC to BUSD + Coinbase suspending trading for BUSD next week

The crypto markets saw yet another sharp drop-off at the end of the week with average and median WoW price declines of 16.5% and 15.6%, respectively. This week's price action stemmed from the collapse of major VC and start-up bank Silicon Valley Bank (NASDAQ: SIVB) on March 10, 2023 (the second-biggest bank collapse in US history🫠).

let’s jump right in 👇

🪦 RIP Silicon Valley Bank

Silicon Valley Bank (NASDAQ: SIVB) announced that it was shutting down and that regulators were taking control of the company on March 9, 2023. This statement happened after a ~$40bn+ bank-run on 3/9/2023, the same day the company announced it was taking “strategic actions” to “benefit from higher rates and better protect against market volatility.” The banks intention to reposition its balance sheet to take advantage of higher rates was interpreted as a sign of weakness from depositors (read: VC backed start-ups and tech companies) and many investors urged portfolio companies to move deposits off the beleaguered platform.

There have been many threads posted about the incident, and Blockworks Research has compiled some great threads walking through the details.

🤔 Open questions about USDC and reserves at SVB?

Circle, the company behind the USDC stablecoin stated that SVB is one of the bank partners used to manage 25% of its cash reserve.

Circle made a non-comment with its latest post on Twitter, simply acknowledging that it has exposure to SVB but not providing any information on the scope of its relationship.

Avi lays out a back-of-the-envelope analysis - assuming 20% of USDC’s reserves are held in SVB, and there is a ~92% haircut on SVB assets, then the backing of USDC would be cut by ~$182mm which Avi believes would be easily absorbed by Coinbase’s balance sheet.

🫣 Binance suspends auto-conversion of USDC to BUSD + Coinbase suspending trading for BUSD next week

Binance put out a note on March 10, 2023 stating that it has suspended auto-conversion of USDC to BUSD due to “current market conditions” and flags it as a “normal risk-management procedural step.”

Unclear at this point how much this action has to do with Coinbase’s aforementioned decision to suspend trading for BUSD on March 13, 2023. Coinbase previously announced this change on Feb 27, 2023.

that’s all folks.

Detailed L1 dashboard for people who love more numbers in smaller font:

Detailed L1 dashboard for people who love more numbers in smaller font:

Note: Revenue represents fees that go to the protocol’s treasury or are returned to tokenholders via a burn mechanism (source: Token Terminal). Weekly commits and weekly dev activity as of 3/3/23.

The content is for informational purposes. None of the content is meant to be investment advice. Use your own discretion and independent decision regarding investments.