[Daily] Bitcoin survives SVB

Good morning! Welcome to The Daily Moon. A solo miner struck gold on the Bitcoin blockchain. Using just 0.002% of the network’s power, the pseudonymous miner Pineconeeee solved a Bitcoin block and earned ~$150,000 in rewards. They’d only been mining solo for two days. Talk about luck.

As of Monday, 8PM IST

The crypto market recovered even as stocks stayed jittery. Bitcoin rallied on investor buying. Ethereum was bullish ahead of its big upgrade. S&P 500 and Nasdaq were cautious amidst recovery worries due to bank runs. Back home, Sensex and Nifty ended lower on concerns of an SVB contagion risk in India.   

A Signature Crisis

Silicon Valley Bank and Signature Bank. The collapse of two banks in a period of 72 hours spooked crypto. Entities such as Circle and Ripple were hit, so their tokens bore the brunt too. But things have partially settled. 

What’s the status?Silicon Valley Bank collapsed on Friday, which meant all depositors were impacted. USDC-issuer Circle declared that it held $3.3 billion of its $40 billion reserves with SVB. What happened next was:

1. USDC lost its peg against the US Dollar

2. Purchases via USDC were paused on crypto platforms

Though USDC has regained its peg, the market is cautious. As per the US laws, federal body FDIC insures deposits only up to $250,000 per account holder. This means that large depositors such as Circle will have to wait for recovery. 

They aren’t the only ones. XRP-issuer Ripple also had deposits at SVB, but it didn’t disclose the amount. Ripple CEO Brad Garlinghouse claimed that the company “remains in a strong financial position”. The token’s gained slightly to trade at $0.36 levels. 

Avalanche, Bored Apes’ creator Yuga Labs, and Helium creator Nova Labs are among the other crypto firms with an exposure to SVB.  

Then came SignatureEven as crypto firms started to chalk out their Plan Bs, Signature Bank fell. So far, a handful of entities such as bankrupt crypto lender Celsius and stablecoin issuer Paxos have acknowledged links to Signature. While the $250,000 limits apply here too, a few entities planned it better. 

Circle has exposure to Signature too, but we don't know how much. Signature offered blockchain-based real time payments on its product Signet, now that’s gone kaput as well. 

How did crypto react?There was a knee-jerk reaction on Friday when Bitcoin slipped below $20,000. But it rallied soon after the US authorities promised to protect investor funds. The king crypto is up over 13% at $22,300 levels since then. The crypto market volume rose ~37% to $79.64 billion as of Monday. 

What’s next?Frankly, we don’t know yet. HSBC has acquired SVB’s UK arm. But SVB’s other units as well as Signature Bank need to find buyers soon. Till then, uninsured funds will stay locked.

Shapella Is Here

The final dress rehearsal for Ethereum’s Shanghai upgrade is scheduled for Tuesday. Called Shapella, it will activate Ether withdrawals for the first time ever. Ahead of the tests, Ethereum rose over 8% to ~$1,580. 

What will change?Close to 16 million ETH tokens valued at ~$26 billion are staked. These tokens were locked since the Beacon Chain launch in December 2020. But this will change soon. Shapella, the last leg of the Shanghai upgrade, will test out unstaking. The full deployment of withdrawals, however, will happen after Shanghai launches on the mainnet in April. 

What do ETH users need to do?If you use a digital wallet or crypto exchange to hold ETH, there is nothing to be done. But if you are a validator or run your own ETH node, you’ll have to update your node. You can test your withdrawals before the actual shift takes place.

Pound-ing The Digital Table

The UK has a love-hate relationship with crypto. On the one hand, there are talks of  making the UK a crypto hub. But on the other hand, UK banks have tightened rules for crypto users. But at the core, the country is keen to adopt digital assets. 

People are unhappy with TradFiThere is a realisation that the country’s public is unhappy with its financial system.  The decline of the British pound in 2022 added to the volatility woes. So lawmakers turned to the buzzword of digital assets. A digital pound is WIP and the country is not averse to Bitcoin as well. That’s despite crypto adoption being low in the UK.

US wants a share While we are on quick fixes, the US is never far behind. President Joe Biden’s $6.9 trillion budget plan wants to penalise wash sales in crypto. That’s when you sell a security for a loss and buy the same or similar asset within 30 days, expecting the price to go up. Except that the “similar” is very different in the case of crypto. Such as Bitcoin and Wrapped Bitcoin. Completely different even though they share a similar name. SMH.

South Korea Gets Metaverse Ready

While other countries are undecided on crypto, South Korea wants to be a contrarian. The country has planned to go all into the metaverse. 

How?It has launched a Metaverse Fund. The country’s Ministry of Science and ICT has already invested the equivalent of $18.1 million to build on the digital universe. And will further take it up to $30.2 million. The idea is to support mergers and acquisitions of companies in the metaverse. South Korea has already made inroads into the metaverse, like the digital replica of Seoul, for instance.

More experiments followThere’s also Japanese automakers that are experimenting with metaverse things. Such as Nissan. It filed four new Web3-related trademarks in the US. On the side, it has also dabbled with auto sales in the metaverse. Now it plans to get into virtual clothes, cars, headgear, trading cards, toys, tickets and NFTs. Hope it’s done the math. 

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