Tremors, Shudders, and Outright Collapse
Neither banks nor crypto feel safe, but Bitcoin was built for this
It’s hard to wrap my mind around this last week.
If you’re still breathing, if you’re still solvent, if you’re still in the game—congratulations. The shakedown that occurred this week has left many breathless. A few of the highlights (or maybe—lowlights):
Bitcoin entered the week struggling to maintain a price above $20,000
MyAlgo, a major wallet for the Algorand cryptocurrency, announced it had experienced a large security breach
Users were urged to move their funds and rekey their wallets in light of the attack
Silicon Valley Bank collapsed, triggering a bank run and a liquidity crisis
This is the second largest bank collapse in US history
Treasury secretary Janet Yellen has signaled there won’t be a federal bailout for the bank
SVB is a regional bank, but the “bank of choice” for many tech companies, venture capitalists, and entrepreneurs
Many fear the contagion will spread to other banks
USDC, a popular stablecoin pegged to the US dollar, lost its peg, triggering a separate crypto contagion.
Circle, the main issuer of USDC, announced that Silicon Valley Bank failed to transfer over $3 billion of USDC cash assets to Circle in light of the bank collapse.
This triggered a massive selloff of USDC, with redemptions placing so much pressure on reserves that the coin lost its dollar peg.
Late Saturday, Circle pledged to cover “any shortfall” in redemptions
Each of these topics could merit their own writeup here on Substack. All point one way, though.
The economy is not strong right now.
Tech, and crypto have been hit the hardest. Money and investment flowed into those sectors over the last few years, with speculation running as hot as the enthusiasm. Now the tide has gone out, and the pillars undergirding it all have been exposed as weak.
The problem is— tech touches everything.
Online sales prop up small businesses, social media is a huge avenue for connection and advertisement, we all carry computers around in our pockets…
I could go on and on.
But there is something else to remember, especially for us—the little guys in the middle of this tornado.
Bitcoin was built for this.
It’s the only truly decentralized blockchain, the only asset that can’t be destroyed by a bank collapse or an investment shakedown. Price swings aside, Bitcoin’s fundamentals don’t move on the whims of Janet Yellen or from the pressure of tech companies.
Innovation around Bitcoin might be impacted, but not Bitcoin itself. If you’re struggling to totally understand this, now is the time to reread the Bitcoin whitepaper. It’s only nine pages.
It’s worth a close study.
In the meantime, buckle up. This washout isn’t done with us yet. Gale force winds ahead. Anyone who thought the choppy waters were behind us was wrong—including me.
The Crypto Connection is for entertainment purposes only and is not meant to be financial advice. Please do your own research before investing in any asset class. Sara Celi is not a financial advisor, and holds several cryptocurrencies. To purchase her books on Amazon, please click here.