Silicon Valley Bank bankruptcy: what impact for the crypto industry?

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Saturday, March 11, 2023

The Californian bank, known as one of America's tech banks, has just collapsed in the space of two days. In particular, it held more than $3 billion in reserves of the USDC stablecoin, which is the second largest on the planet...

Until a few weeks ago, hardly anyone knew about Silicon Valley Bank. But for the past 48 hours, it has been the talk of the town: the Californian bank has just gone bankrupt in an extreme panic reminiscent of the 2008 financial crisis and the collapse of... Lehman Brothers.

Silicon Valley Bank is no small banking institution. It has just over $200 billion in assets under management. Its collapse is the 3rd largest bank failure in American history. Only Washington Mutual ($300 billion), which has since become a savings bank, and Lehman Brothers ($600 billion) are bigger bankruptcies.

The bank for start-ups and... crypto

Created 40 years ago, Silicon Valley Bank, based in Santa Clara, very quickly established itself as a key player in American Tech.

It finances start-ups, giants such as Shopify and Beyond Meat, the biggest funds on the planet (Andreessen Horowitz in particular), and works with players in the crypto... In particular, it manages part of the USDC stablecoin reserve of the American company Circle, which has confirmed that it has just over $3 billion in reserves blocked at the institution.

As soon as the information was confirmed, the 2nd largest stablecoin on the planet (around $40bn in capitalisation) began to rock. The USDC momentarily lost parity with the dollar. At the start of the weekend, it fell slightly below $0.90, before returning to around $0.95 after Circle announced in a statement that the company would "come what may" guarantee the value of its stablecoin.

Stablecoin fell sharply on March 11 before recovering (source: CoinMarketcap)

This analysis is not investment advice. It has been prepared without taking into account your personal situation, particularly your financial situation, risk profile, and investment objectives.

Before investing in any product, investors should fully understand the risks involved and consult their own legal, tax, financial, and accounting advisors.

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