The recent collapse of Silicon Valley Bank (SVB) on March 10 has caused concern and doubt within the crypto community, prompting a return to the origins of Bitcoin — the white paper that was published shortly after the Lehman Brothers’ collapse in 2008.
Many are fearful of a few banks failing. It’s crucial to understand the reason behind BITCOIN’S CREATION.
— Toby Cunningham (@sircryptotips) March 11, 2023
Ryan Selkis, the founder and CEO of Messari, emphasized the awakening of a new generation of builders who previously dismissed Bitcoin in the face of events like the financial crisis. He welcomed these newfound allies with open arms.
Surprised at the rapid pace of events unfolding. It’s truly astonishing.
— Meltem Demirors (@Melt_Dem) March 10, 2023
Just six weeks after the dramatic Lehman Brothers’ collapse, Satoshi Nakamoto introduced the legendary white paper that set the stage for the birth of the Bitcoin network.
Some attribute the SVB’s failure to the rising interest rates in the U.S. The Federal Reserve raised its benchmark rate to over 4.5% in the past year — the highest since 2007. In January, the U.S. inflation rate stood at 6.4%.
Yet another unexpected event in 2023: a bank run caused by interest rates.
— Sheila Warren (@sheila_warren) March 10, 2023
The collapse of Silicon Valley Bank has impacted numerous crypto and tech firms. SVB, an FDIC-insured institution, faced imminent closure, prompting USD Coin (USDC) issuer Circle to initiate a wire transfer to withdraw its funds. Circle disclosed its inability to access $3.3 billion of its $40 billion reserves from SVB, triggering a sell-off and causing the stablecoin’s value to dip below its $1 peg.
A bank run within 24 hours of inception. pic.twitter.com/PjqGh1UAXg
— Michael Bentley (@euler_mab) March 11, 2023
The ripple effect was felt in the stablecoin realm as USDC deviated from its peg to the U.S. dollar, influencing other stablecoins to follow suit. Dai (DAI), issued by MakerDAO, lost 7.4% of its value due to USDC’s depegging, as reported by Cointelegraph.
Stablecoins
Stablecoins
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Unstablecoins— Cope (@Timccopeland) March 11, 2023
However, other prominent stablecoins like Tether (USDT) and Binance USD (BUSD) managed to maintain their 1:1 peg with the dollar.
Circle is now advocating alongside other clients and depositors for the continuation of SVB, citing its significance to the U.S. economy. The company pledged to adhere to state and federal regulatory directives.
SVB’s closure by the California Department of Financial Protection and Innovation on March 10, for undisclosed reasons, led to the appointment of the FDIC as the receiver to safeguard insured deposits. Nonetheless, the FDIC only covers deposits up to $250,000 per depositor, institution, and ownership category.
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