Pundits Perform Post-Mortem on Crypto Bank Crisis

Rewrite and expand this content to 800 words Other Illustration by Mitchell Preffer for Decrypt Crypto prices rebounded hard this week on news that the U.S. government will intervene to ensure that depositors of the failed industry-servicing institutions Silicon Valley Bank (SVB) and Signature would be made whole. As could be expected, Crypto Twitter was all over the topic, as it was last week; but Monday’s news brought much needed closure to the industry. Prices had suffered as far back as the beginning of the month, when another bank called Silvergate—which actually transacted in crypto— delayed filing its annual 10-K report with the U.S. Securities and Exchange Commission (SEC), prompting speculation as to the state of its finances. On Monday, a day after Signature was shut down by the New York state chartering authority, popular exchange Coinbase revealed the extent of its exposure to the bank and promised that its operations were business as usual. As of close of business Friday March 10 Coinbase had an approximately $240m balance in corporate cash at Signature. As stated by the FDIC, we expect to fully recover these funds. https://t.co/XY5L7m4RMs — Coinbase (@coinbase) March 12, 2023 Over in the UK that day, British Finance Minister Jeremy Hunt announced that his ministry had brokered a bailout deal in which HSBC acquired the British arm of SVB for £1 to make British businesses with exposure to the bank whole. This morning, the Government and the Bank of England facilitated a private sale of Silicon Valley Bank UK to HSBC Deposits will be protected, with no taxpayer support I said yesterday that we would look after our tech sector, and we have worked urgently to deliver that promise — Jeremy Hunt (@Jeremy_Hunt) March 13, 2023 Crypto journalist and podcaster Jason Yanowitz tweeted a list of alternatives to the two defunct banks. Cross River has not hedged any of it’s HTM portfolios according to it’s own filings. Absolute disaster of a solution if I ever saw one. — Peter | פיטר | Tel Aviv Commodities (@TLVOilTrader) March 13, 2023 The banking crisis news had self-proclaimed cypherpunk @dystopiabreaker squaring the blame solely on the authorities and their antipathy to crypto. “because we personally do not like their customers” is not a valid answer to these questions — ⚡🌙 (@dystopiabreaker) March 13, 2023 Crypto venture capitalist Nic Carter, a general partner at Castle Island Ventures, said the same, using the words of Barney Frank, a former American politician, Wall Street reformer, and Signature Bank board member. Dear God. Barney Frank openly admits that Signature was arbitrarily shuttered despite no insolvency because regulators wanted to kill off the last major pro-crypto bank. Colossal scandalhttps://t.co/Sa25w6Au7b pic.twitter.com/gLuiybHepS — nic carter 🌠 (@nic__carter) March 13, 2023 Caitlin Long, founder of crypto bank Custodia, jumped on a tweet by Forbes crypto analyst Jason Brett and joined the chorus of disgruntled crypto fans, accusing the Fed of hypocrisy and shady practice in their repeated rebuffs of her attempts to register her own institution with them. OH MY, THE CONTRAST–Fed voted down 100%-cash reserved @custodiabank & then days later voted a bank bailout after 2 epic bank runs (as Fed Vice Chair for Supervision brags Fed-supervised banks are “well protected from bank runs” on the morning of SVB bank run). Can’t make it up🤯 https://t.co/zFKP6iFO99 — Caitlin Long 🔑⚡️🟠 (@CaitlinLong_) March 13, 2023 Jessica Lessin, founder of tech publication The Information, was incensed by this bit of reporting on the SVB crisis by the Wall Street Journal. She’s right. It’s substandard. For @wsj to say flat out that SVB could have failed because they added non-white men to their board shows how far behind the times (and certifiably stupid) this publication really is. It makes me so angry and very sad. WSJ readers and staff deserve better. pic.twitter.com/ppbcugJNhW — Jessica Lessin (@Jessicalessin) March 13, 2023 By Thursday, it looked like the general ire with U.S. regulators had spread as far as Europe. #BREAKING: European financial regulators are “furious” at the handling of Silicon Valley Bank by US authorities. “They tore up a rule book they helped write.” Senior Eurozone official said the US showed “total and utter incompetence” pic.twitter.com/I9BxoUKLCd — Mario Nawfal (@MarioNawfal) March 16, 2023 In other news When it became apparent that Silicon Valley Bank was in hot water, before any word of top-down intervention, consumer sentiment towards USD Coin issuer Circle was rapidly declining. Last weekend, the dollar-pegged stablecoin actually depegged by 13 cents. At least one savvy trader worked the situation to their advantage. A whale bought 17.05M $USDC with 16M $USDT during #USDC depegging and repaid the $USDC debt on #Aave. The whale made more than $1.05M! Did you guys buy $USDC at a low price during the $USDC depegging to repay the debt?https://t.co/R4GTob3vVM pic.twitter.com/QJYAr9lHcA — Lookonchain (@lookonchain) March 13, 2023 On Monday, Stephane Kasriel, a FinTech leader at Facebook and Instagram parent company Meta, announced the end of NFT integration across the company. Whatever next? Will Meta abandon the metaverse pivot it’s been so flamboyantly preparing for? Some product news: across the company, we’re looking closely at what we prioritize to increase our focus. We’re winding down digital collectibles (NFTs) for now to focus on other ways to support creators, people, and businesses. 🧵[1/5] — Stephane Kasriel (@skasriel) March 13, 2023 Avalanche founder and CEO Emin Gün Sirer announced his new post as an adviser to D.C. regulators. I’m thrilled to have been appointed to the CFTC’s Technical Advisory Board. I’ll do everything I can to move the space forward, inform regulators about the latest developments in crypto, and bring the benefits of blockchains to our financial system.https://t.co/5RpC1pb8Sd — Emin Gün Sirer🔺 (@el33th4xor) March 13, 2023 Jim Cramer’s financial advice made the rounds on Tuesday, mainly for its comedy value. Holy Sh*t! Stack every sat you can. ASAP! Jim Cramer: “I would sell my bitcoin.”#bitcoin pic.twitter.com/8MzKtySzB1 — Neil Jacobs (@NeilJacobs) March 13, 2023 Coinbase’s Conor Grogan churned a smart contract through ChatGPT-4 and found multiple vulnerabilities. Grogan is not the first and he certainly won’t be the last. I dumped a live Ethereum contract into GPT-4. In an instant, it highlighted a number of security vulnerabilities and pointed out surface areas where the contract could be exploited. It then verified a specific way I could exploit the contract pic.twitter.com/its5puakUW — Conor (@jconorgrogan) March 14, 2023 Republican House Majority Whip Tom Emmer (R-MN) on Wednesday shared a letter he sent to the Federal Deposit Insurance Corporation, accusing the regulator of using the banking crisis to instigate a purge on crypto-friendly institutions. Today, I sent a letter to FDIC Chairman Gruenberg regarding reports that the FDIC is weaponizing recent instability in the banking sector to purge legal crypto activity from the U.S. 👇 pic.twitter.com/fDmaA0XGWv — Tom Emmer (@GOPMajorityWhip) March 15, 2023 On Friday, Senator Elizabeth Warren tweeted some shameless and way over-the-top anti-crypto propaganda. It’s no wonder the American people are skeptical of a system that holds millions of struggling student loan borrowers in limbo but steps in overnight to ensure that billion-dollar crypto firms won’t lose a dime in deposits. — Elizabeth Warren (@ewarren) March 16, 2023 On the other end of the spectrum, pseudonymous Twitter economic commentator James Medlock and former Coinbase CTO and former Andreessen Horowitz partner Balaji Srinivasen are entering into a $1 million public bet over the prospect of U.S. hyperinflation and the possibility that it would cause the value of Bitcoin to skyrocket. I’ll bet anyone $1 million dollars that the US does not enter hyperinflation — James Medlock (@jdcmedlock) March 16, 2023 I will take that bet.You buy 1 BTC.I will send $1M USD.This is ~40:1 odds as 1 BTC is worth ~$26k.The term is 90 days.All we need is a mutually agreed custodian who will still be there to settle this in the event of digital dollar devaluation.If someone knows how to do this… https://t.co/tcuBNd679T pic.twitter.com/6Aav9KeJpe — Balaji (@balajis) March 17, 2023


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