Light in the dark

It’s not all doom and gloom

Welcome back. What. A. Week. Crypto went absolutely haywire following the collapse of Silicon Valley Bank—the second-largest bank failure is US history. Has this bear market just gotten more grim? Or is there nowhere else to go but up? Shoot me a reply with your thoughts.

To interrupt the macro doom and gloom, today’s stories: Silvergate in a nutshell, Snoop Dogg’s new web3 endeavor, and a fun Gary Gensler story (seriously). Let’s dive in.

—Angelina

The TL;DR on Silvergate

Companies collapsing? Just a regular Tuesday in crypto. But things hit differently when TradFi banks get pulled under as a result. Last week, Silvergate Bank announced its “voluntary liquidation,” marking the end for one of crypto’s most important partners.

Some context: Silvergate Bank was your average regional bank until 2018, when it recognized that crypto companies were struggling to find banking partners. So? Silvergate went all in on crypto and became the sector’s go-to US lender.

But Silvergate’s collapse has been a long time coming. How we got here:

  1. Crypto contagion. Silvergate was rocked by the contagion of crypto firm collapses last year. It weathered a 40% staff cut and a $1 billion loss in Q4 2022, and regulators probed Silvergate’s connections to FTX and Alameda—which in turn contributed to investor uncertainty.

  2. Concentration risk. 90% of Silvergate’s deposit base came from crypto companies. So when the crypto industry found itself in a rough patch and companies needed to withdraw their money, most of Silvergate’s deposits flowed out at once.

  3. Macroeconomic changes. Silvergate invested depositors’ cash into securities like treasuries and mortgage-backed bonds (a standard practice among fractional reserve banks). The Fed’s interest rate hikes caused those securities to depreciate—which is rough if you have to sell them at a loss to fund depositor withdrawals.

What now for crypto? Silvergate’s controlled winddown of operations ensures that all depositors will see their money back in full. But Silvergate’s implosion also means that the US’ biggest crypto-fiat gateway is gone, leaving the crypto industry scrambling to maintain its USD on- and off-ramps.

Big picture: Crypto skeptic senators were quick to frame Silvergate’s fall as the inevitable byproduct of TradFi getting involved with crypto. But the recent crisis at Silicon Valley Bank shows that it’s not just a crypto problem—macroeconomic disruption, concentration risk, and structural issues in the US banking system are likely the bigger culprits.

Snoop's Next Episode

Snoop Dogg isn’t one thing (rap icon, cannabis entrepreneur, etc.), but if he were? It would be a savvy businessman. Adding to his vast portfolio of web3 projects, the Doggfather is backing the interactive audio and video streaming platform Shiller.

The details: Set to launch next month, Shiller (think of it as a hybrid of Twitter Spaces, TikTok, and Twitch) integrates web3 tech to allow creators to engage with their communities and monetize their content.

  • Creators will be able to “token-gate their video and audio, share products from commerce sites, and promote popular NFTs,” according to Shiller.

  • They can also create their own tokens and receive crypto tips (which can be cashed out in fiat).

My two sats? Shiller solves real problems creators face on incumbent social platforms— ownership and monetization. But a good idea and Snoop’s name probably won’t be enough to draw creators and users from Instagram and TikTok.

Bottom line: Web3 believers think platforms like Shiller will replace existing broadcasting and social media models *checks notes* someday. But awareness for the web3 ethos likely isn’t mainstream enough yet for Shiller to catch on—though I’d love to be proven wrong.

How the Tables Have Turned

Today in I can’t believe that actually happened: Binance once offered Gary Gensler a job.

According to the WSJ, Binance sought to hire Gensler as a regulatory advisor back in 2018—well before Gary G. became Chairman of the SEC and one of the most polarizing figures in the crypto space. And while Gensler may have declined the offer, he still appeared to be rather generous in sharing licensing strategies with Binance.

The irony: Today, Gensler is spearheading the SEC’s aggressive crackdown on crypto—one in which Binance faces increased scrutiny.

In other news:

  • USDC and DAI stablecoins suffered a major depeg.

  • State regulators shut down Signature, another major crypto banking partner.

  • Vitalik Buterin dumped $700k worth of crypto airdrops on the market, tanking prices.

  • Voyager Digital won court approval for its sale to Binance.

  • Amazon will launch its very own NFT marketplace.

Crypto Job Board

And that's what you need on your radar today in crypto. The silver lining of the whole SVB fiasco? It’s a reminder to crypto skeptics that TradFi isn’t immune to failure. Catch you back here next week to check in on the contagion.