In This Issue
- Silicon Valley Bank, Stablecoins & Ethereum
- My latest portfolio updates.
- Jesse has a deep dive for you on Enjin Coin.
- Web3 Academy explains the business of blockchains.
- Sam has a report for you on RTFKT.
- Rebecca breaks down this week’s trending coins.
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What Just Happened?
Well… what an insane few days in the markets. It is rare that we see so much chaos in such a short amount of time. I hope you are doing ok.
Silicon Valley Bank
SVB has collapsed. It was the second-biggest collapse in US banking history and was the 20th biggest bank with around 180 billion in assets. The bank is deeply connected with a huge range of tech start-ups and for us, in crypto, it managed about 8% of USDC’s cash reserves. Money that is now stuck in limbo. It remains to be seen what kind of contagion effects the bank could kick off across the US economy and if any other banks are at risk here.
USDC, Dai, and Frax
Some of the biggest stablecoins (USDC, DAI, and FRAX) in the market depegged after the SVB collapse. This was a week after BUSD was slammed by the SEC. USDT is the last coin standing so to speak.
I personally have about ⅔ of my stablecoins in USDC. Ironically I switched from BUSD recently over fears about what would happen to it. Out of the frying pan and into the fire it seems. At the time of writing I am holding the USDC and do not want to sell for a significant loss. Although it doesn’t feel good and of course, I fear a further USDC breakdown. This is not a UST situation though, there will “hopefully” not be a death spiral to zero.
USDC is currently backed by 92 cents per token. They have 37 billion in assets making around 4.5% a year in interest. They will also likely get back the majority of their money from SVB, some are saying it will be 77 cents on the dollar. Meaning that USDC will then be backed by about 98 cents per token. The remainder could easily be filled by interest payments and VCs or Coinbase. This could all take a long time though.
I could be wrong and things may be worse than they appear. I could also lose a huge sum of money by staying in USDC if I am wrong. Suddenly my “safe stablecoin” has put me in a precarious bet on the future of the Circle company and the restoration of the USDC peg.
I am not happy at all about that.
“When” USDC repegs or maybe gets close enough say 98 or 99 cents, I will switch over to USDT and then take some more money out of the market. It just feels like there is just no safe place to keep money in crypto at the moment.
Crypto is exhausting sometimes.
BTW, Circle issued a statement saying that they are committed to meeting their obligations and that they will use corporate funds to cover any short falls. They are saying it will remain redeemable 1 for 1. Let’s see.
Ethereum Is A Security?
If the USDC peg situation wasn’t enough, the New York Attorney General came out on Thursday with a lawsuit against Kucoin. In that suit, they claimed that Ethereum is a security. If it were…
