The collapse of the Silicon Valley Bank (SVB) on March 10 has sent shockwaves throughout the financial sector, with the crypto community turning to Bitcoin as a potential alternative to traditional banking institutions.
The collapse of the SVB has sparked fear, uncertainty, and doubt (FUD) in the crypto community, with many now turning to the Bitcoin white paper published just weeks after the Lehman Brothers meltdown in 2008. “There’s an entire generation of builders who only read about Lehman and the financial crisis and scoffed at Bitcoin. Now, their eyes are wide open. Welcome new friends,” stated Ryan Selkis, founder and CEO of Messari.
Approximately six weeks after the collapse of Lehman Brothers, Satoshi Nakamoto released the now-famous Bitcoin white paper, paving the way for the emergence of the Bitcoin network. Today, many in the crypto community see Bitcoin as a potential alternative to traditional banking institutions, which they view as vulnerable to collapse.
Some people blame the SVB failure on rising interest rates in the United States. The Federal Reserve increased its benchmark rate over the past year to more than 4.5% — the highest rate since 2007. In January, the inflation rate in the U.S. was 6.4%.
Many crypto and tech companies are affected by the collapse of Silicon Valley Bank. SVB, a Federal Deposit Insurance Corporation-insured bank, was about to shut down operations when USD Coin (USDC) depegged from the U.S. dollar. USDC’s collateral influence prompted other stablecoins to depeg from the dollar, including Dai, Tether, and BUSD.
Circle, a major player in the stablecoin ecosystem, said it is now joining other customers and depositors in calling for the continuity of SVB, which the company alleged is important for the United States economy. Circle stated on Twitter that it would follow state and federal regulators’ guidance.
SVB was shut down by the California Department of Financial Protection and Innovation for undisclosed reasons on March 10. The California watchdog appointed the Federal Deposit Insurance Corporation (FDIC) as the receiver to protect insured deposits. However, the FDIC only insures deposits up to $250,000 per depositor, institution, and ownership category.
The collapse of SVB has led to a surge in interest in Bitcoin, with many in the crypto community seeing it as a potential hedge against future banking collapses. However, others caution that Bitcoin is not a panacea for all financial woes and that its value can be highly volatile.
Despite the uncertainties surrounding Bitcoin and the crypto market, many in the crypto community believe that the technology underlying Bitcoin has the potential to transform the financial sector, making it more accessible, secure, and decentralized.