The Sudden Collapse of Silicon Valley Bank on Friday creates a panic across the technology industry. But crypto executives and investors — who have endured a year of near-constant upheaval — seized on the moment to preach and scold.
Centralized banking was to blame, the crypto advocates said. Their vision of an alternate financial system, unmoored from big banks and other gatekeepers, was better. They argued that the government regulators that recently cracked down on crypto firms had sown the seeds of the bank’s implosion.
Various companies affected by the crash of the prominent crypto bank. BlockFi, Circle, Avalanche, Yuga Labs, and Proof are among the crypto names that had exposure to now-shuttered Silicon Valley Bank.
BlockFi
Crypto-friendly bank Silvergate has been forced to return $9.85 million to BlockFi as part of the crypto lender’s ongoing bankruptcy proceedings. According to documents made available on the website of BlockFi’s restructuring advisor, the bankruptcy court overseeing BlockFi’s restructuring process ordered Silvergate to immediately release $9.85 million to the now-defunct crypto lender on Friday.
The order comes as BlockFi and Silvergate entered an agreement in August 2020 where Silvergate acted as a depository institution “with respect to credit and/or debit entries initiated by BlockFi through Silvergate to accounts maintained at Silvergate and other depository financial institutions.” In November 2021, BlockFi agreed to establish a reserve containing $10 million. The agreement stated that the account would terminate 90 business days after the last relevant transfer, granting BlockFi unrestricted access to those funds.
“Silvergate shall immediately release $9,850,000 from the Silvergate Reserve Account to an account designated by the Debtors,” the order said, while permitting Silvergate to hold the remaining $150,000 in the reserve account. The court order is part of BlockFi’s ongoing bankruptcy proceedings, which became the first company to file for bankruptcy in the aftermath of the collapse of FTX. The crypto lender has more than 100,000 creditors and owes between $1 billion and $10 billion to those creditors
Circle
U.S. cryptocurrency firm Circle has $3.3 billion of its $40 billion of USD Coin reserves at the collapsed lender Silicon Valley Bank, the company said in a tweet on Friday. The stablecoin company’s announcement comes after startup-focused SVB collapsed on Friday in the largest bank failure since the 2008 financial crisis, roiling global markets and stranding billions of dollars belonging to companies and investors.
Traders have been on guard this week for signs of contagion in the financial sector and beyond from troubles for SVB and crypto-focused Silvergate, which this week disclosed plans to wind down operations and voluntarily liquidate. Boston-based Circle said last week it had moved a “small percentage” of USDC reserve deposits held at Silvergate to its other banking partners.
Circle said in another tweet on Friday that it and USDC continue to operate normally while it waits to see how SVB’s receivership will affect its depositors, while several crypto companies took to Twitter to deny any exposure to the collapsed SVB. The chief executive of cryptocurrency exchange Binance said in a tweet on Friday it had no exposure, as did Tether CEO Paolo Ardoino. Stablecoin issuer Paxos and crypto exchange Gemini tweeted they do not have any relationships with SVB.
Avalanche
The Avalanche Foundation, which supports the Avalanche blockchain, announced Friday evening that it has “a little over” $1.6 million in exposure to Silicon Valley Bank. Avalanche’s native token AVAX, currently boasts a market capitalization of $4.84 billion. They tweeted, “In light of recent news, we would like to confirm that the Avalanche Foundation has no exposure to Silvergate and a little over $1.6mm of exposure to Silicon Valley Bank. Avalanche Foundation is saddened by the news about SI and SIVB, and hope that all depositors are made whole.”
YugaLabs
Yuga Labs, the $4 billion company behind dominant NFT collection Bored Ape Yacht Club (among other projects), is exposed to SVB. Yuga co-founder Greg Solano said Friday that the company has “super limited exposure” to the failed bank, though Yuga has not yet confirmed exactly how much. Solano said the amount “doesn’t impact our business or plans in any way.”
Proof
Another leader in NFTs, may have been hit harder. The Web3 project created by Digg co-founder Kevin Rose, which is behind leading NFT collection Moonbirds, issued a statement Friday confirming the company holds cash as Silicon Valley Bank.
“Proof holds cash at SVB, however… We’ve thankfully diversified our assets across ETH, stablecoins, as well as fiat,” the company Tweeted Friday. Proof has not yet disclosed what amount of cash it has tied up with SVB. While the company conceded that SVB’s collapse “sucks,” it also insisted the potential loss wouldn’t affect the security of customer’s assets, or Proof’s roadmap.
Impact on cryptocurrencies
The repercussions of the announced “wind down” of Silvergate Bank were still unfolding when Silicon Valley Bank failed. Market leaders Bitcoin and Ethereum saw heavy losses, but they weren’t the only losers: virtually every leading cryptocurrency is down by double-digit percentages coming into the weekend.
The markets were first roiled by the demise of crypto bank Silvergate. The writing was on the wall last week when the bank delayed filing its annual 10-k report with the United States Securities and Exchange Commission, leading to a sustained pullback in prices throughout the previous week.
The speculation continued on Tuesday, when the White House’s press secretary said Washington was monitoring the situation. The following day, Silvergate’s parent company announced the bank was shutting operations. The news led to a market-wide selloff which sent the combined market capitalization of all cryptocurrencies back below a trillion dollars.
Bitcoin (BTC) is down 10.5% and is sitting right at the $20,000 support level at the start of the weekend. It’s at $20,055 at the time of writing. Ethereum (ETH), the world’s No. 2 cryptocurrency by market cap, had a similar trajectory this week. It’s down 9.5% over the last seven days and is starting the weekend around $1,425.
Similar losses of around 15% were posted by Polygon (MATIC), which is now worth $1.04, Polkadot (DOT) is worth $5.52, Shiba Inu (SHIB) trades at $0.00001024, Avalanche (AVAX) changes hands at $14.76, Uniswap (UNI) is worth $5.63, and Chainlink (LINK) trades at $6.20. The steepest losses this week (around 20% or more) were posted by Filecoin (FIL), which is currently worth $5.30, OKB trades at $39.74, Solana (SOL) changes hands at $17.74, and Dogecoin (DOGE) trades at $0.065269
