WHY Silicon Valley Bank Matters for Crypto 💥

👇 1) When the European Central Bank cut interest rates (deposit) rates below zero in 2014, EU banks underperformed US banks by 60% while many EU banks lost massive investment banking market share - and are near non-existent now -> Interest rates matter!

👇 2) Only a year ago, the US Fed stopped QE and has ventured on the fasted rate hike endeavor since 50-years as the COVID stimulus money printing had a far larger impact on inflation than the policy makers expected -> Understanding the future matters!

👇 3) As everybody expects this rate hike policy only to be temporary and as the Fed only controls the front end of the curve (2-years), longer term interest rates (10-years) are far below the shorter-term rates -> Not sustainable, that's why there is always a big blow up when the yield curve inverts!

👇 4) This so-called yield curve inversion is now 0.89% and basically is a rate that US banks have to subsidize longer terms loans (if any) as they pay deposits short term but lend out to borrowers longer term. In periods of low loan demand, banks will just park the money in mortgage bonds, treasury bonds etc.

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👇 5) The issue is if those bonds decline and banks can not hold them until maturity as depositors want their money back and the bank's mark-to-market losses have skyrocket. Its about the journey, not the destination. This has happened at Silicon Valley Bank (SVB) where the bank was forced to sell off their mortgage book at a loss.

👇 6) FIDC deposits are only insured up to $250k and when there is a bank run, depositors might lose out. Roku for example had 26% of their cash at SVB, and others too. The banks CEO had of course sold $3.6m worth of stock during the last two weeks in preparation of this expected bank run.

👇 7) Stablecoin issuer Circle (USDC) has also "an undisclosed amount" at SVB which has just been shut down by California regulators. Circle has so far not been forthcoming with information how much money they have at SVB.

👇 8) As a result the 3Pool is seeing Tether USDT being drained. Normally, this liquidity pool has 33% of each, DAI, USDT and USDT in it but currently there is only 6% of USDT left. Now USDC is slightly de-pegging and trading at $0.9929 (instead of at $1.00).

👇 9) Volumes in USDT are massive at $65bn during the last 24h but so is volume in Bitcoin ($51bn) vs. just $15bn a week ago. Bitcoin network transaction fees are very high and are indicating panic

👇 10) From the three major stablecoins, we now have ONE standing and of course, that's the BIG one -> Tether's USDT which has weathered the Paxos-Binance BUSD storm in February and is also now weathering the Circle USDC storm.