From Silvergate to Signature, how will the collapse of these banks affect blockchain and cryptocurrencies? Is this our last? Find out here.
Will the blockchain world collapse as US banks fall like dominoes?
As American banks fail one after the other, the whole world watches the situation with concern. The consequences of the collapse of banks such as Silvergate, SVB and Signature will be far-reaching. Much of the world has already felt the impact and at least all of us in the crypto/blockchain community feel uncertain about the future of its projects.
How many of us in blockchain and crypto should die from this alleged banking crisis? How will it affect Web3? You will find the answers to these and other questions right here.
Why is this crash threatening the blockchain?
Blockchain projects are at a particular disadvantage due to the aforementioned disintegration. Both Silvergate and Signature have done business with crypto businesses and startups. Moreover, they were among the largest such banks in the US. They have worked with clients such as Gemini, Coinbase and Kraken.
In addition, SVB issued loans to many startups (partially) in the crypto world. In addition, Circle and Blockfi deposited $3.3 billion and $227 million respectively in this bank. The closure of SVB has almost killed the startup industry; startups will struggle for years in search of investments.
Because of these points of contact with crypto, it was easy to blame cryptocurrencies for the current situation. Bearing in mind that Silvergate and Signature were doing business with the defunct FTX, that’s the impression they made on the izvol’te.
And so the public blamed crypto, and blockchain companies came under fire. Crypto is now even less accessible to exchange with fiat currencies, and blockchain adoption is likely to be delayed due to the imposed reputation. Investors will also avoid crypto and blockchain projects, which will make it even more difficult for such startups to grow.
Blame the old order, not DeFi
It becomes increasingly clear to anyone who looks further into the subject that the collapse of these banks is the result of poor risk management by traditional financial institutions, as well as panic among their customers. Poor, non-transparent business practices by executives throughout the financial sector led to the fall of the first domino.
As for Silvergate, the collapse of FTX caused a chain reaction of withdrawals, mostly by crypto firms that now have no way to keep the token liquid. Let’s remember: FTX failed due to the commingling of client funds and lack of transparency, not due to any intrinsic dangers of cryptocurrencies.
Like Silvergate, SVB was flattened by frantic withdrawals from customers after the bank tried to raise capital and recoup a $1.8 billion loss. This loss was due to the bank’s short-term investments in long-term fixed-income securities, such as US government bonds. Investors lost confidence and hurried to withdraw.
Signature was taken over by the New York Department of Financial Services in a move to prevent another deposit drain. On the bright side, Signature’s depositors will be able to get their funds back as the situation was brought under control before chaos erupted.
Essentially, Silvergate, SVB and Signature all went down due to panicked cash withdrawals. That rush was due to reckless investing during inflation, panic-mongering and a lack of auditing and reporting. But crypto has served as the perfect culprit for a government that is extremely skeptical of it.
Blockchain and crypto will recover
The collapse of these banks is a big problem. However, it will not permanently affect blockchain and cryptocurrencies. Blockchain projects with clear use and value will still be able to raise the necessary capital. The path to the mentioned capital has become more difficult, but the focus on the concrete benefit of the product will lead projects to success.
Proponents of cryptocurrencies have noted that recent events actually demonstrate the need for cryptocurrencies. While traditional banks struggle with inflation and liquidity, the Bitcoin network continues to grow, cool as a syringe despite the storm of the financial world. Moreover, its value soared after the aforementioned banks began to fail.
As time passes and more information comes to light, trust in crypto and blockchain will return. It can become stronger than ever with the help of good PR and marketing.
To see where the tech world is going, visit TMRW Conference Belgrade 2023. This event is the largest hotbed of Web3 ideas—including blockchain, artificial intelligence, the metaverse, crypto, and more—in the world.
Listen to relevant, eminent experts and their incredible ideas, absorb knowledge from deep discussions of brilliant minds, participate in workshops, share your opinions and contribute to this unique convention.
Source: PC Press by pcpress.rs.
*The article has been translated based on the content of PC Press by pcpress.rs. If there is any problem regarding the content, copyright, please leave a report below the article. We will try to process as quickly as possible to protect the rights of the author. Thank you very much!
*We just want readers to access information more quickly and easily with other multilingual content, instead of information only available in a certain language.
*We always respect the copyright of the content of the author and always include the original link of the source article.If the author disagrees, just leave the report below the article, the article will be edited or deleted at the request of the author. Thanks very much! Best regards!