For cryptocurrency enthusiasts, the recent crisis in the US banking sector was an unexpected opportunity, as the story of the beginning of Bitcoin, which emerged in the wake of the global financial crisis, has returned again. #chinwa.tech_crypto
In this issue of the Bloomberg Crypto newsletter, Michael B. Reagan details a weekend of “opportunities”:
Work for the weekend It is often said that every crisis is an opportunity. By this logic, the cryptocurrency market has been nothing more than a “land of opportunity” for the past year.
For cryptocurrency enthusiasts, the recent crisis in the US banking sector was another unexpected opportunity. First, the story of bitcoin’s creation after the global financial crisis is back: it’s a preferred, more sustainable alternative to traditional banking, and it’s immune to the kind of panic that hit Silicon Valley Bank last week, triggering one second The biggest banking collapse in history
However, there have been more subtleties to the opportunities available in this crisis, aside from the return of “Bitcoin extremists” talking points. This is because, unlike other markets that give everyone a chance to catch their breath on Saturdays and Sundays, cryptocurrencies are traded 24/7.
So, as this past weekend began with the mystery of the fate of Silicon Valley Bank customer deposits, including some $3.3 billion in support of Circle Internet Financial’s stablecoin, codenamed US$ Coin. … (USDC), cryptocurrency traders managed to intervene. when the coin was always supposed to be pegged to $1 selling for 85 cents
Specifically, for those in DeFi who borrowed US$Coin and another unpegged stablecoin called DAI, this was an opportunity to sequester those coins and pay off over $2 billion in debt at a total discount of about $105 million, according to what reported by news website Axios, citing estimates from Flipside Crypto.
Lessons from the crisis There are some lessons to be learned from this story. One is that despite all the talk about building a new and improved financial system, some of the most important pillars of cryptocurrency are still closely tied to the traditional system. Therefore, developments in one system can very quickly backfire on the other.
Just ask the investors who held devalued shares in Silvergate Capital Corp. and the “crypto-friendly” Signature Bank, whose holdings evaporated when those banks were wound up. Or Binance customers in the UK, who suspended deposit and withdrawal services via bank transfers and card payments after a local partner stopped supporting sterling transactions.
The other lesson is for those who dumped the US dollar coin at 85 cents on the dollar on Saturday, perhaps forgetting or not knowing that while the traditional financial system may be closed on weekends, the Federal Reserve tends to work long hours. Extras on Saturdays and Sundays. when there are problems that require a quick solution
In other words, sometimes the opportunity created by a crisis is an opportunity to make things worse. This is not a proper way to spend a weekend.
Bitcoin Price Watch Bitcoin price topped $26,000 for the first time since June as calm returns to financial markets and old cryptocurrency narratives take on new life
“Two of the biggest crypto banks are gone… I’ve been through a lot of crises,” says Marco Lim, a crypto hedge fund executive.
Meanwhile, investors and digital asset firms are racing to build new banking relationships after the collapse of three crypto-friendly US banks.