In the last week, we witnessed the collapse of several banks in the U.S., including Silicon Valley Bank (SVB), Silvergate, and Signature. In fact, SVB was the largest bank to fall since Lehman Brothers filed for bankruptcy during the financial crisis of 2008. 😱
While regulators have confirmed customer deposits with SVB are secure, the contagion effects of these collapses are already starting to show. 👀
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All three banks had a sizeable exposure to the blockchain and crypto industry. For instance, Circle, the issuer of the USDC stablecoin, held $3.3 billion in cash with SVB, resulting in the de-pegging of the digital asset and other stablecoins. 💰
Moody’s, a leading credit rating agency, lowered its outlook on the U.S. banking system to ‘negative’, due to a deteriorating macro environment. As banks continue to wrestle with liquidity issues, the funding prospects for several Web 3 and blockchain companies might be under threat in the near term. 🏦
The bank runs also led crypto depositors to move their digital assets from centralized exchanges to cold wallets or other decentralized platforms. According to data from Glassnode, around $1.8 billion worth of Bitcoin and ETH were withdrawn from exchanges resulting in an appreciation for self-custody of the decentralized assets. 📈
Crypto prices also spiked ⬆️ over the weekend with Bitcoin and ETH gaining 20.5% and 17% respectively in the last five days, as the collapses emphasized the need for a decentralized financial system.
The blockchain industry is now devoid of three major lenders that were quite supportive of the Web3 and blockchain ecosystem. But the bank runs also show us exactly why Satoshi Nakamoto created Bitcoin, a trustless, decentralized, and scarce digital asset. 💡
So, will recent bankruptcies lead to the widespread adoption of Bitcoin and blockchain-based products and services in the next decade? 🤔