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Ripple Effects & Bulls

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Ripple Effects & Bulls

Viktor DeFi
Mar 17, 2023
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Ripple Effects & Bulls

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Hey, friend!

It’s the 5th edition of Gems Corner. Today, we’re shining light on the ripple effects of the SVB collapse, bulls & other alpha bits.

Enjoy the gems.


Last weekend, one of the United State’s biggest banks - Silver Valley Bank (SVB), collapsed. Not just that, it is also the second-biggest collapse in the history of the United States banking system after Washington Mutual.

Wondering what triggered the collapse? Here’s an insightful comment from James Angel, an expert on regulating global financial markets at Georgetown University, that explains it.

SVB collapsed because of a stupid rookie mistake with their interest-rate-risk management: They invested short-term deposits into long-term bonds. When interest rates rose, the value of the bonds fell, wiping out the equity of the bank.

What’s interesting here is that SVB transcends retail investors and customers. It is a bank for tech startups and unicorns, including crypto-native projects. That means, whatever affects it, also affects tons of startups and organizations.

But this newsletter is not an exegesis of the SVB collapse; many media outlets have captured that already. Rather, it analyzes the positive and negative effects on the financial and, most importantly, the crypto community. Negative Effects and Exposures…

Twitter avatar for @jerallaire
Jeremy Allaire @jerallaire
What is the impact on the USDC reserve? USDC is 100% collateralized with a combination of cash and US Treasuries. Specifically, USDC is currently collateralized 77% ($32.4B) with US Treasury Bills (with a three month or less maturation period), and 23% blackrock.com/cash/en-us/pro…… https://t.co/IfKygVUaB4
8:19 PM ∙ Mar 11, 2023
532Likes70Retweets

The First and most-crucial effect on the crypto industry is SVB's impact on Circle's USDC stablecoin. As you may already know, USDC is a fiat-backed stablecoin combining cash and US Treasuries.

However, they had $3.3bn of USDC cash reserve with SVB, exposing them to the collapse. This exposure, coupled with Binance's halt of USDC-BUSD auto-conversion and Coinbase's withdrawal, threw the crypto industry into panic, leading to USDC de-pegging from USD.

Even though the gravity of Circle USDC’s exposure wasn’t much, FUDDings on Twitter scared users, followed by massive USDC withdrawals and conversions. But, as of writing, the peg has been restored, and USDC is doing fine.

Here are other contagions and effects…

Twitter avatar for @TensaiCapital
Tensai Capital @TensaiCapital
Apparently Schwab has even more HTM losses relative to equity capital than SVB? Should I be emptying my brokerage account there? I literally have no idea what the counterparty risk structure of assets in an equities brokerage account looks like 😅
Image
5:21 PM ∙ Mar 10, 2023
41Likes4Retweets
Twitter avatar for @GRDecter
Genevieve Roch-Decter, CFA @GRDecter
Is Silicon Valley Bank is in trouble. But is the rest of the U.S banking system? Short 🧵
3:04 PM ∙ Mar 10, 2023
3,851Likes568Retweets

The contagion within the U.S. banking system might be more than it seems. Centralized financial institutions operate in a web effect, not as an isolated entity. That means a stain on SVB is a stain on many other financial agencies, as captured in the thread mentioned by Genevieve Roch-Decter.

Twitter avatar for @JasonYanowitz
Yano 🟪 @JasonYanowitz
My god. @garrytan on CNBC just now: Over 1,000 YC companies have been impacted. This is an extinction level event for startups. These depositors will not survive without a government plan.
9:50 PM ∙ Mar 10, 2023
3,071Likes478Retweets

The SVB collapse also impacted many tech startups incubated by YCombinator. This and much more exposures.

Positive Effects on Crypto Protocols

As a result of the panic over USDC’s de-peg, crypto users heavily withdrew and converted their USDC into other crypto assets.

Twitter avatar for @ViktorDefi
Viktor DeFi 🛡🦇🔊 @ViktorDefi
Ethereum is arguably the biggest gainers of the USDC/Circle saga. They turned about $11M in profit from swaps and other trading activities 👀
Image
Image
10:12 PM ∙ Mar 12, 2023
65Likes12Retweets

The SVG saga led to a massive revenue of about $11 million via fees from swaps and withdrawals on the Ethereum network. A good weekend for Ethereum, indeed, lol. That’s not even all.

Twitter avatar for @AustinAdams10
Austin Adams @AustinAdams10
Yesterday had the highest daily USD volume ever on the @Uniswap Protocol! $11.84b, almost double the second place day. @DuneAnalytics: dune.com/queries/2191594
Image
2:06 AM ∙ Mar 12, 2023
256Likes40Retweets

Uniswap also had $12b in daily volume, hitting 11 digits for the first time ever! You’ll agree that this is the ‘best’ day for Uniswap. I bet some other DEXes and chains experienced such too, but I end it here for the section.


Chart of the day

USDC is coming up stronger with a massive injection of liquidity this week on different pairs. It’ll only take a matter of time before it assumes its rightful position.


Alpha Drips

Twitter avatar for @thedefiedge
Edgy - The DeFi Edge 🗡️ @thedefiedge
21 must-know DeFiLlama features you should be using:
1:35 PM ∙ Mar 16, 2023
577Likes221Retweets
Twitter avatar for @0xKofi
Kofi @0xKofi
Introducing "ERC-4337 Account Abstraction Overview" 🪪✨ A dashboard tracking ERC-4337 wallet activity on Ethereum and @0xPolygon - Active Accounts - Bundled Transactions - Gas Fees Covered by Paymasters And more! dune.com/niftytable/acc…
dune.comERC-4337 Account AbstractionBlockchain ecosystem analytics by and for the community. Explore and share data from Ethereum, Bitcoin, Polygon, BNB Chain, Solana, Arbitrum, Avalanche, Optimism, Fantom and Gnosis Chain for free.
3:43 PM ∙ Mar 16, 2023
78Likes9Retweets
Twitter avatar for @LidoFinance
Lido @LidoFinance
An update on Lido Ethereum withdrawals: TL;DR: - Lido DAO is currently undertaking 7 V2 audits. - Codebase is very close to being finalized. All major fixes have been merged. - 4 week Goerli testnet will commence next week (c. March 20th). - Mainnet upgrade expected mid May.
8:27 PM ∙ Mar 14, 2023
230Likes53Retweets
Twitter avatar for @Louround_
Louround 🥂 @Louround_
To create generational wealth in crypto you need to access the right information at the right time! But it’s easy to get overwhelmed 🤕 After spending thousands of hours on Twitter, I created 9 lists filled with 60+ chads that cover the whole industry (steal them for free) 🥂
Image
6:09 PM ∙ Mar 14, 2023
1,448Likes511Retweets

Spoiler alert: I’d add a section on airdrops & mints from the 6th edition, don’t miss it.

Also, I will appreciate your feedback.

Thanks for reading!

Until next Friday,

Viktor DeFi.

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Ripple Effects & Bulls

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Ripple Effects & Bulls

viktordefi.com
Lekan🛸
Mar 18Liked by Viktor DeFi

Thanks for this round-up, Vicktor🔥Really helps.

Keep up the good work, I appreciate it.

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