Bitcoin is up about 14% in a 7-day period as the US banking system wobbles

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Welcome back to Chain Reaction.

It’s been an insanely busy and chaotic past seven days. Unless you live under a rock, you probably know what I’m talking about. But for those who don’t (or just want a recap), let’s get into it.

Last week, some major US banks made headlines. Signature Bank, a crypto-friendly regional bank in New York, was shut down by regulators over systemic risks that could threaten the US banking system. This closure came just days after Silicon Valley Bank crashed and Silvergate Capital wound down operations.

Known as one of the largest cryptocurrency lenders, Signature was the second victim of the ongoing US banking crisis, but regulators said its clients will be healed, meaning the government is stepping in to protect the economy from further damage.

For reference, Signature Bank had 40 branches in New York, California, Connecticut, North Carolina and Nevada. As of December 31, 2022, the bank had $110.4 billion in total assets and total deposits of $82.6 billion. About 30% of the bank’s deposits came from the crypto industry.

Going forward, the crypto industry should closely monitor deposit flight from regional banks in the coming week, said Tegan Kline, chief business officer and co-founder of Edge & Node. “If it gets worse, the regulators will have a huge problem. Many regional banks may have to close.”

In the wake of all the banking chaos, bitcoin and ethereum, the largest cryptocurrencies by market capitalization, had seven-day gains of about 15% and 8% respectively at the time of publication, according to CoinMarketCap data. The global market cap for all cryptocurrencies also rose 8.3% over the same period to about $1.1 trillion, slightly down from a weekly high of $1.14 trillion on Tuesday, the data showed.

However, the overall market turmoil has seemingly created bullish sentiment in the crypto economy as traders reacted positively to the news and the overall market cap rose over the course of the week.

This week in web3

Chaos At US Banks Could Push The Crypto Industry Towards Decentralization (TC+)

The crypto industry lost some banking ups and downs due to recent collapses in the US banking sector, indicating that there may be a shift in the space towards decentralization and a need for regulation in the future. With the closure of these banks, it will become difficult for cryptocurrency companies to move money between entities and access banking services, said Mina Tadrus, CEO of quantitative investment management firm Tadrus Capital LLC and general partner of Tadrus Capital Fund. “Furthermore, such closures could lead to diminished investor confidence who may no longer be aware of the necessary safeguards in their banking transactions.”

The mess of the SVB could become the problem of stablecoins (TC+)

After USDC detached from $1 last week, many in the crypto industry are wondering if the collapse of Silicon Valley Bank will have a bigger impact on the stablecoin ecosystem. If nothing else, this latest market event will “spark more interest in the stablecoin sector among global regulators,” said Lucas Kiely, chief investment officer of digital asset platform Yield App. “This can only be good for the industry, which needs much clearer guidance for more institutions to join.”

Meta is ending support for NFTs on Instagram and Facebook

It seems that Meta is NGMI, as some might put it. Meta’s head of trading and financial technologies, Stephane Kasriel, posted on Twitter that the company will be discontinuing its NFT and digital collecting features on Instagram and Facebook. This short-lived product was only tested last May with select Instagram creators, plus some Facebook users in June. In July, Meta expanded NFT support on Instagram to creators in 100 countries. Less than a year later, Meta moves on from NFTs…RIP.

Hackers steal about $200 million from cryptocurrency lender Euler Finance

Euler Finance, a non-custodial DeFi protocol, was misused on Monday of approximately $197 million worth of crypto. While this sounds like a lot of money – and it is – it’s only the 26th largest crypto theft ever, according to the Rekt Database, which tracks DeFi scams, hacks and exploits. Since then, the team behind the protocol has offered a $1 million reward for information leading to the arrest of the attacker and the return of the money.

India Investigates ‘Multiple’ Crypto Money Laundering Cases Seizing Over $115 Million

India’s Enforcement Directorate is investigating “several” crypto cases for money laundering and has so far seized $115.5 million in such crimes, the finance ministry said, the latest in a series of crackdowns by authorities in the nascent space. The revelation comes as India moves forward with rules to better scrutinize the activities of cryptocurrency companies, even though New Delhi has so far resisted formulating a blanket law to regulate the virtual digital assets.

The latest pod

For last week’s episode, Jacquelyn interviewed Jack Mallers, the founder and CEO of Strike, a bitcoin-based payment network and financial app that’s trying to grow cross-border payments and remittance markets. Last year, Mallers’ company raised $80 million in a Series B round to grow in that space and also partnered with big companies like Visa, Clover and Fiserv.

Mallers is also the CEO of Zap, a bitcoin investment and payments company that transacts on the Lightning Network, a second layer on Bitcoin’s blockchain that enables off-chain transactions between parties.

We discussed Mallers’ backstory, how he got into the Bitcoin scene in his late teens, whether the lightning network could be better than the payment networks that exist today, and how big players were able to enter the space. This episode focused heavily on Bitcoin, so brace yourself.

We also dove into:

  • The global potential of Lightning Network
  • El Salvador’s Bitcoin Adoption
  • Creating new infrastructure to make Bitcoin more accessible
  • Future of Strike and the Bitcoin Ecosystem

Subscribe to Chain Reaction on Apple Podcasts, Spotify or your favorite pod platform to stay up to date with the latest episodes, and leave a review if you like what you hear!

Follow the money

  • Backed with $3 million, Soul Wallet aims to take self-hosted crypto wallets to the next billion
  • KuCoin and Circle back Chinese yuan-pegged stablecoin CNHC in $10 million round
  • Virtual fashion platform DressX raises 15 million dollars
  • DWF Labs invests $10 million in blockchain infrastructure provider Orbs Network
  • NFT social platform Metalink raises $6 million in a seed round
  • This list was compiled using information from Messari and CoinTech’s own reporting.

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