🗓💊 Chaos, Collapse & Confusion Timeline

Daily Bullets - Monday, March 13th

Theo Delarosa
March 13, 2023

Today’s newsletter is 1388 words, a cool 5 ¼- minute read.

The crypto market is recovering. After a chaotic weekend full of uncertainty, confusion and the collapse of several crypto banks, things seem to be settling, for now. USDC has nearly regained peg and it’s looking like the Feds are stepping in to make sure the Fed coin doesn’t fail.

For those keeping track, we’ve got 3 banks in trouble: Silvergate, Silicon Valley Bank and Signature.

Oh, and if things didn’t seem tumultuous enough, someone thought today would be a good day for another 9 figure exploit. (Euler Finance ~$185M)

Are you comfortable in USDC?

Today we’re looking at:

⏳🤯 Chaos, Collapse and Confusion Timeline
👨‍⚖️👮‍♂️ The Feds to the Rescue
🏦💣 Signature Bank Next Domino
✅ Daily Bullets
📊 Market Dashboard
📚 Research/Reads
📝 Good Tweets

⏳🤯 Chaos, Collapse and Confusion Timeline

Quick Take: How quickly things can change in crypto. A recap of what the crypto industry faced last week:

Timeline:

Monday: Silvergate shares down, starting a bad week for the crypto bank
Wednesday: Silvergate confirmed voluntary liquidation, causing concerns for crypto firms' access to U.S. banking system
Thursday: Silvergate shares tumbled 42.1%, and the crypto market followed
Friday: Silicon Valley Bank collapsed, causing USDC stablecoin to depeg and drop as low as $0.88.
Circle confirmed that $3.3B of its approximately $40B USDC reserves remained with Silicon Valley Bank

Significance: In the span of a few days, we saw human psychology play out in a classic and timeless manner. For hundreds of years we’ve seen these types of bank runs where people panic and behavior becomes predictable.

Whether the fears are founded or unfounded, we can clearly see the results when everyone tries getting their money out of an institution at the same time. Chaos and bank runs ensue.

Go Deeper:

👨‍⚖️👮‍♂️ The Feds to the Rescue

Quick Take: USDC nearly regained its peg on the news that all Silicon Valley Bank and Signature Bank deposits will be fully returned to customers. The Federal Reserve Board announced a $25B Bank Term Funding Program (BTFP) offering loans of up to one year to eligible depository institutions.

Key Details:

Eligible firms must pledge qualifying assets as collateral, which will be valued at par
Program aims to ensure that eligible banks have enough liquidity to cover the needs of their customers during times of turmoil and will be an additional source of liquidity against high-quality securities
U.S. Treasury Secretary Janet Yellen approved actions for the Federal Deposit Insurance Corporation (FDIC) to make SVB depositors whole

Significance: This seemed to be the news that helped spring the crypto market back up, knowledge that the Feds were gonna step in and help people get their funds out.

This is incredibly important as the contagion for crypto companies and startups could be massive if nothing is done. Bank bailouts are controversial but the damage without it would be more controversial. A vicious circle.

Go Deeper:

🏦💣 Signature Bank Next Domino

Quick Take: New York-based Signature Bank was shut down by state regulators, according to the Federal Reserve, citing systemic risk.

Key Details:

Third bank collapse in under a week, following Silvergate Bank's voluntary liquidation and Silicon Valley Bank's shutdown
The FDIC took receivership of the bank to protect depositors
Senior management removed
The Federal Reserve, FDIC, and US Treasury Department said all depositors who used Signature would be made whole
No losses will be borne by the taxpayer as with the resolution of Silicon Valley Bank

Significance: 3 crypto banks all starting with the letter “S’ collapse in one week! Unreal. Thankfully, it seems that the Feds learned after the FTX collapse and are now quicker to intervene and try to stem the fire.

We’ve even got some market participants optimistic that this reintroduction of quantitative easing by the Fed will result in another bull run - although this might be pushing it. Mitigating disaster is not the same as bullish catalysts.

Go Deeper:

✅ Daily Bullets

🔥 Highlights

Coinbase paused USDC:USD conversions over the weekend while banks are closed
Circle - $3.3B of USDC reserves are with Silicon Valley Bank
USDC will remain redeemable 1 for 1 with U.S. dollar, Circle says
DAI depegs to lifetime lows of $0.88
US Fed announces $25B in funding to backstop banks
Signature Bank shut down by state regulator
Coinbase, Celsius and Paxos disclose funds in Signature Bank
Binance converting remaining $1B industry recovery funds from BUSD to BTC, ETH and BNB
Euler Finance exploit - more than $185M suspected to have been stolen
MakerDAO launched an emergency proposal about USDC to limit Maker’s exposure
BlockFi, Circle, Avalanche, Yuga Labs, and Proof had exposure to Silicon Valley Bank
Silicon Valley Bank UK arm acquired by HSBC for one pound
Digital asset investment products outflows for the 5th consecutive week totalling $255M

📰 Crypto News

Binance launched a large number of stablecoin trading pairs
Pantera Capital used Silicon Valley Bank as a custodian
Bybit or client fund no exposures to either Silvergate or SVB
DraftKings faces lawsuit for allegedly selling unregistered securities
OpenSea users may have been exposed to a new deanonymization vulnerability
Meta is working on a decentralized social app
⁠Nissan files 4 new web3 trademarks, trials sales in the metaverse
Brevan Howard takes over Dragonfly Capital Crypto Fund
Mastercard and Visa are still signing new debit card deals with crypto startups around the world
Ark picks up more Coinbase stock, adding $6.4M
SEC denies VanEck Bitcoin spot ETF for a third time
The Pokémon Company hiring a Web3 Expert
Bankless new 2.0 launch
South Korea's Ministry of Science and ICT created a Metaverse Fund
Moonbirds whale sells almost 500 NFTs on Blur for significant losses

💲Coin/Project Updates

Uniswap v3 protocol will become free to use after business license expires on April 1
Compound v2 Pause Guardian temporarily disabled USDC supply transactions
⁠Aave freezes stablecoin trading on Avalanche V3
Sunset of Aztec Connect, privacy infrastructure that served as the encryption layer for Ethereum
Shibarium early beta test is live
PeopleDAO Community Treasury on Safe exploited
Stargate Foundation is recommending the DAO NOT re-issue the STG token
Radiant v2 launch
Brave Browser now lets users sell crypto within the wallet
MapleStory introduces MapleStory Universe
Astroport mainnet launches on injective
RabbitX mainnet is here
Wormhole launches Aptos NFT bridge
GHO risk monitoring dashboard
AcrossProtocol updates roadmap
T3rn wins Polkadot Parachain Auction #41

📊 Market Dashboard

Chart of the Day - Stablecoin USD Flows

March 11th saw outflows of $2.84B and March 12th saw inflows of $1.93B. Seems that assurances that the Fed was gonna plug losses helped fuel the inflow. Also worth noticing that these inflows and outflows pale in comparison to May 2022 when Terra and 3AC collapsed.

📚 Research/Reads

Ether a Security? | That Could Have Huge Ramifications for Crypto, Legal Expert Says - source
Cherry Crypto | In Search of DeFi Fixed Rates - source
Ongoing series on Uniswap liquidity pools, concentrated liquidity, and fee dynamics | Discrimination of Toxic Flow in Uniswap V3: Part 4 - source
Top 168 angel investors in web3 | Angel Investor Database - source
Moats in the age of token warfare | Revisiting Aggregation Theory - source
HashKey Capital Report | Top 5 Tech Trends to Watch in 2023 - source
Based rollups | Superpowers from L1 sequencing - source
Decentralized Science | The Future Of Medicine Is Tokens - source
Base | Coinbase's plan to go 'on-chain native' is a smart play for fees - source
$6.9T budget plan | Biden’s Tax Hike Proposal and What It Means for Bitcoin 'Wash Sales' - source
Binance Research | Monthly Market Insights - March 2023 - source

📝 Good Tweets

Delphi Digital with a timeline of SVB’s collapse

1/ Silicon Valley Bank’s collapse is the largest bank failure since 2008.
The bank run has made its way into the crypto ecosystem with the 2nd largest stablecoin $USDC de-pegging to hit a low of $0.85.
Here is our MEGA-thread that is following the situation LIVE: ⬇️🧵
— Delphi Digital (@Delphi_Digital)
Mar 12, 2023

Alf on how the Fed and US policymakers are handling SVB

Massive announcement by the Fed and US policymakers.
The gist: all depositors of SVB and Signature Bank made whole, and a new facility to provide liquidity to banks under stress.
A short thread.
1/
— Alf (@MacroAlf)
Mar 12, 2023

Unusual_whales showing some unusual selling behavior from Silicon Valley Bank and insiders

BREAKING: Before the collapse of Silicon Valley Bank, $SIVB, the CEO sold $3.57 million of stock within the last two weeks.
— unusual_whales (@unusual_whales)
Mar 10, 2023