Good ol’ fashioned bank run, BTC rallies upwards

Dear member,

This past week has certainly been a historic rollercoaster ride for crypto and tradfi, with news of the collapse of Silicon Valley Bank (SVB) and Signature Bank taking center stage - both now the second and third-largest bank failure in U.S. history.

What started as an ultrasafe $124 billion bond portfolio (without any hedges) hit a wave of swelling interest rates that ended up in a good ol’ fashioned bank run. Like most banks that rely on the fractional reserve system (allowing them to hold a marginal reserve of as little as 10%), SVB couldn’t sustain mass withdrawals in a short period.

Fear spread to clients of crypto-friendly Signature Bank, which saw over $10 billion in withdrawals. That effectively sealed its fate and led U.S. regulators to take over the bank in preparation for a sale process. With a systemic “social media risk” enabling news to travel faster and farther, the banking system has rarely been this vulnerable.

Could a further erosion of trust in centralized financial systems cause a recent capital flight to cryptocurrencies, allowing BTC to rally to a 3-week high of $25,000?

Trading volume on DEXs also saw a high of $25 billion in a single day. A marginally lower inflation data of 6% may have something to do with this. Not to mention, Binance’s chief honcho CZ deploying his remaining BUSD war chest to buy BTC.

Though the U.S. banking crisis overshadowed last week’s news, several big developments happened that are worth highlighting. One of which is the implementation of a new URL standard built on Ethereum.

It’s still early days, but users will be able to access DApps and NFTs through “web3://” protocol without accessing websites via centralized servers. It’s a small step by Ethereum that marks a big change in the world wide web’s infrastructure.

In other news, big brands like Salesforce and Nissan are getting knee-deep in Web3, announcing significant trademark filings and investments to expand alternative offerings to their large customer base.

It may be hard to see the forest for the trees in this climate of recent big bank failures and poor market sentiment. But we have come a long way since the financial crisis of 2008-2009. Our financial institutions are more resilient, and despite occasional black swan events that affect the crypto market, clearer skies may come sooner than you’d expect.

Best regards from the Future,
RFTF.ai 

Market Intel

Signature Bank, a crypto-friendly bank, has been shut down by regulators and taken over by New York Department of Financial Services. The bank had $88.6 billion in deposits as of 31st Dec 2022.

Silicon Valley Bank, a prominent bank for start-ups, was closed by the FDIC last Friday due to its poor financial state, leaving thousands of start-ups without access to its own funds to operate.

Circle mints $407m worth of USDC, the second-largest stablecoin by market cap, as it recovers from its depedding from the dollar due to exposure from the collapsed Silicon Valley Bank.

BTC rallied to a 3-week high of $25,000 despite spike in key banking sector risk indicators, strengthening the case for deepening distrust in central banking systems and a possible pause in rate hikes.

U.S. inflation data of 6% eased concerns while the crypto economy jumped 11% higher.

Funding Trends

DressX, a digital fashion house backed by Warner Music, raised $15 million in a funding round to improve its technology and scale its NFT offerings.

Cathie Wood’s Ark Invest raised $16 million for a new crypto fund, hot off the heels of adding more COIN shares.

Web2 → Web3 Immersion

A new URL (web3://) standard built on Ethereum allows users to access DApps and NFTs without worrying about centralized censorship.

Nissan files 4 trademarks related to Web3 to strengthen its foothold in the space, including start of trials of its own virtual store.

LiveArt, founded by Sotheby’s and Christie’s veterans, launches new mint pass that provides exclusive access to first NFT mints from world-renowned artists.

Salesforce announces new platform, Salesforce Web3, to allow its clients to develop NFT loyalty programs.

Regulatory Round-up

APAC

National Australia Bank successfully executes cross-border stablecoin transfer on a Layer-1 blockchain, marking a first for a major financial institution.

Asia

Indian lawmakers from the ruling and opposition parties met in a rare occasion to discuss potential opportunities in Web3 for India.

Xapo Bank enabled GBP payments and to begin USDC stablecoin services soon, despite banking crisis in U.S.

Europe

European politicians contemplate building “Europeum,” a blockchain that protects data privacy and used for public services and supply-chain management.

A paper proposal for EU finance ministers lays out possibility of establishing digital euro CBDC with the same legal status as banknotes and coins.

The Raven Also Spotted

Silvergate Bank, Silicon Valley Bank, and Signature Bank closures may cause temporary pain, but likely not to hurt crypto industry in the long run.

DEXs like Uniswap and Curve saw a record high $25 billion of trading volume last Saturday, marginally surpassing its previous high when BTC was at $65,000.

BitMEX’s trading data shows confidence from global institutions is growing in the crypto market despite recent market shakeup, predicting a bull market around the corner.

Ex-FTX and Alameda Research execs found to have received $3.2 billion in payments and loans from FTX-linked entities, a recent debtor claim showed.