Kalam Crypto #65: Banks dumping, Bitcoin pumping 🚀

This week, we cover the collapse of three US banks that served the crypto and tech industries, USDC temporarily losing its peg, and what happened to Signature bank?

13 Mar, 2023

CoinMENA Team

Author

“The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.” - Satoshi Nakamoto

Ahlan wa sahlan, and welcome to the 65th edition of CoinMENA's weekly newsletter, Kalam Crypto. Wow, what a week. Banks crashing, bitcoin pumping. We have a long way to go, but it sure does seem Satoshi’s thesis is playing out as expected. This week, we cover the collapse of three US banks that served the crypto and tech industries, USDC temporarily losing its peg, and what happened to Signature bank? All that and more, so let's dive into this week's letter, and talk crypto:

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Global News 🌍

US Banking Crises: Three U.S. regional banks failed in the past week. Silvergate, Silicon Valley, and now Signature have been shut down by regulators. Silvergate was the first domino to fall, they announced they will be winding down operations with the intent to fully pay back depositors. For Silicon Valley Bank Bank (SVB), the FDIC stepped in and announced they will guarantee all customer deposits. This announcement came during an emergency meeting over the weekend to stem any further market panic. Essentially the FDIC had to lift the cap of insured deposits from $250,000 to, infinity.

Will this bailout announcement be enough to stem market panic? For equity holders, it doesnt seem so. Because FDIC is ensuring depositors, and not equity or bond holders. Therefore, other bank stocks were tumbling and trading was halted on Monday. SVB was the second biggest banking failure in the history of the United States.

The curious case of Signature Bank: When reports first came out that regulators took control of Signature Bank, it was assumed that they were suffering from the same liquidity issues as SVB. Barney Frank, a board member of Signature Bank said that while customers did panic and request withdrawals, the Bank was already stabilized before New York state regulators stepped in to close the crypto-friendly bank. He further commented that he believes that “Regulators, especially the New York state regulators, wanted to send the message that crypto is toxic.

Circle backs USDC: After the collapse of Silicon Valley Bank (SVB), USDC quickly lost its peg and dropped to a low of $0.88 as it was revealed that Circle had $3.3 billion USDC reserves with SVB. On Friday, regulators closed SVB, and the FDIC became the bank's receiver. Circle, the issuer of USDC, stated that it would use corporate resources to cover any USDC deficits, even if their reserves were not retrieved by FDIC. The company confirmed that operations would resume as usual on Monday and that its stablecoin would be redeemable for one U.S. dollar.

Blog of the Week ✍️

Our CEO @ Talal Tabbaa shares his thoughts on the latest banking crises in the US, why it happened, and what it means for crypto going forward.

Keep An Eye On 👀

While banks are failing, bitcoin is pumping 🚀

Tweet Of The Week 🐥

CoinMENA News 🗞

$2,000 to 8 users: We’re giving away $2,000 to 8 new users! ($250 each)🎉 All you have to do is sign up and verify your account by 22 March 2023. If you are already a verified user, invite your friends to join CoinMENA so they too can invest in the future of finance!

Quiz Corner ✅

Last week’s question: What is a smart contract?

Answer: A binding agreement between two parties executed automatically by a computer program

This week’s question: What is a stablecoin?