This Week on Crypto Twitter: Experts Perform a Post Mortem on the Crypto Banking Crisis

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Illustration by Mitchell Preffer for Decrypt

Crypto prices rebounded strongly this week following news that the US government would step in to ensure that depositors at bankrupt industry services institutions Silicon Valley Bank (SVB) and Signature would be cured.

Predictably, Crypto Twitter was all over the topic, as it was last week; but Monday’s news brought a much-needed shutdown to the industry.

Prices had suffered from the start of the month, when another bank called Silvergate, which actually transacted in crypto, delayed filing its annual 10-K report with the States Securities and Exchange Commission (SEC). States, which has sparked speculation about the state of its finances. .

On Monday, a day after New York State Chartering Authority shut down Signature, popular exchange Coinbase revealed the extent of its exposure to the bank and promised that operations would continue as usual. ‘habit.

As of the close of business on Friday, March 10, Coinbase had a balance of approximately $240 million in corporate cash at Signature. As indicated by the FDIC, we expect to fully recover these funds. https://t.co/XY5L7m4RMs

Coinbase (@coinbase) March 12, 2023

In the UK that day, UK Finance Minister Jeremy Hunt announced that his department had negotiated a bailout deal in which HSBC acquired the UK arm of SVB for 1 to make whole UK businesses exposed to the bank.

This morning the government and the Bank of England facilitated a private sale of Silicon Valley Bank UK to HSBC

Deposits will be protected, without taxpayer support

I said yesterday that we would take care of our tech sector, and we worked urgently to keep that promise.

Jeremy Hunt (@Jeremy_Hunt) March 13, 2023

Crypto journalist and podcaster Jason Yanowitz tweeted out a list of alternatives to the two defunct banks.

Cross River has not hedged any of its HTM wallets according to its own statements. Absolute disaster of a solution if I ever saw one.

Stone | | Tel Aviv Commodities (@TLVOilTrader) March 13, 2023

The news of the banking crisis had self-proclaimed cypherpunk @dystopiabreaker blaming only the authorities and their antipathy towards crypto.

because we personally don’t like their customers is not a valid answer to these questions

(@dystopiabreaker) March 13, 2023

Crypto venture capitalist Nic Carter, general partner of Castle Island Ventures, said the same, using the words of Barney Frank, a former US politician, Wall Street reformer and Signature Bank board member.

Caitlin Long, founder of crypto bank Custodia, jumped on a tweet from Forbes crypto analyst Jason Brett and joined the chorus of disgruntled crypto fans, accusing the Fed of hypocrisy and shady practices in their repeated rebuffs of his attempts to register his own institution with them. .

OH MY, THE CONTRAST – The Fed rejected 100% of the reserved cash @custodiabank, then a few days later it voted a bank bailout after 2 epic bank runs (as the vice president of the Fed boasts for oversight, Fed-supervised banks are “well-protected against bank runs” on the morning of the SVB bank run). I can’t catch up https://t.co/zFKP6iFO99

Caitlin Long (@CaitlinLong_) March 13, 2023

Jessica Lessin, founder of tech publication The Information, was infuriated by this reporting on the SVB crisis by The Wall Street Journal. She’s right. It is below standard.

For @wsj to say categorically that SVB could have failed because they added non-white men to their board shows how late (and certifiably stupid) this post really is. It makes me so angry and very sad. WSJ readers and staff deserve better. pic.twitter.com/ppbcugJNhW

Jessica Lessin (@Jessicalessin) March 13, 2023

On Thursday, it seemed that the general anger against American regulators had spread to Europe.

#BREAKING: European financial regulators are furious with US authorities’ management of Silicon Valley Bank.

They tore up a rule book which they helped write.

Senior Eurozone official says US has shown complete and utter incompetence pic.twitter.com/I9BxoUKLCd

Mario Nawfal (@MarioNawfal) March 16, 2023

In other news

When it became clear that Silicon Valley Bank was in hot water, before any word of top-down intervention, consumer sentiment towards USD coin issuer Circle was rapidly waning. Last weekend, the dollar-pegged stablecoin actually fell by 13 cents. At least one savvy trader has worked the situation to his advantage.

On Monday, Stephane Kasriel, a FinTech executive at Meta, the parent company of Facebook and Instagram, announced the end of NFT integration across the company. What is the next? Will Meta abandon the pivot of the metaverse that he so flamboyantly prepared for?

Some product updates: Across the company, we’re taking a hard look at our priorities to increase our focus. We were ending digital collectibles (NFTs) for now to focus on other ways to support creators, individuals, and businesses. [1/5]

Stephane Kasriel (@skasriel) March 13, 2023

Avalanche Founder and CEO Emin Gn Sirer has announced his new position as an advisor to DC regulators.

I am delighted to have been appointed to the Technical Advisory Board of the CFTC. I will do my best to move the space forward, update regulators on the latest developments in crypto, and bring the benefits of blockchains to our financial system.https://t.co/5RpC1pb8Sd

Emin Gn Sirer (@el33th4xor) March 13

Jim Cramers’ financial advice made the rounds on Tuesday, mostly for its comedic value.

Coinbases Conor Grogan created a smart contract via ChatGPT-4 and found several vulnerabilities. Grogan isn’t the first and he certainly won’t be the last.

I deposited a live Ethereum contract in GPT-4.

In an instant, he highlighted a number of security vulnerabilities and indicated surface areas where the contract could be exploited. He then checked out a specific way I could exploit the contract pic.twitter.com/its5puakUW

Conor (@jconorgrogan) March 14, 2023

On Wednesday, Republican House Majority Whip Tom Emmer (R-MN) shared a letter he sent to the Federal Deposit Insurance Corporation accusing the regulator of using the banking crisis to trigger a purge of compatible institutions. with cryptography.

Today I sent a letter to FDIC Chairman Gruenberg regarding reports that the FDIC is weaponizing recent instability in the banking industry to purge legal crypto activity from the United States pic.twitter.com /fDmaA0XGWv

Tom Emmer (@GOPMajorityWhip) March 15, 2023

On Friday, Senator Elizabeth Warren tweeted out brazen and over-the-top anti-crypto propaganda.

It’s no wonder the American people are skeptical of a system that keeps millions of struggling student borrowers in limbo, but steps in overnight to make sure crypto firms d a billion dollars will not lose a penny in deposits.

Elizabeth Warren (@ewarren) March 16, 2023

At the other end of the spectrum, pseudonymous Twitter economics commentator James Medlock and former Coinbase CTO and ex-Andreessen Horowitz partner Balaji Srinivasen enter a public $1 million bet on the prospect of US hyperinflation and the possibility that it will cause Bitcoin’s value to skyrocket.

I’ll bet anyone $1 million that the US won’t go into hyperinflation

James Medlock (@jdcmedlock) March 16, 2023

I’ll take that bet. You buy 1 BTC. I will send 1 million USD. That’s ~40:1 odds because 1 BTC is worth ~$26,000. The term is 90 days. All we need is a mutually agreed custodian who will always be there to settle this in the event of a devaluation of the digital dollar. If anyone knows how to do this https://t.co/tcuBNd679T pic.twitter.com/6Aav9KeJpe

Balaji (@balajis) March 17, 2023

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