Five Billion Dollars Exposure for Prominent Crypto Venture Capitals Due to Silicon Valley Bank Crash:
The Silicon Valley Bank Crash has been deemed the second largest since 2007. Since the crash, various persons and stakeholders have disagreed about the event. While some are convinced that the impact was due to negligence and overconfidence on the bank’s part, others believe it was a foolhardy decision for the bank’s customers to keep uninsured funds in such quantity. Regardless, what remains is that several companies are doomed to suffer the lash back of SVB’s crash. Even cryptocurrency venture capital is not exempted. One has to wonder about the implications of this on the companies and the crypto market itself. The sections below give a detailed analysis of this mind-boggling subject.
How did the SVB Crash cause a Five Billion Dollars Exposure to Crypto Venture Capital
The Silicon Valley Bank is inherently a start-up based, with many businesses and investors relying on its continued existence. However, the imploding of the bank on March 10, 2023 questions the future of several companies, including companies with cryptocurrencies. When the news about the bank’s struggles got out, several start-ups joined the race to get their money out of the bank before it imploded. Although the bank has only little dealings with crypto venture capital, its transactions are significant enough to cause billions of dollars in exposure to the companies.
One significant exposure is that of the Circle. Circle, a company renowned for its dealings in stable cryptocurrency – USDC- whose market price is also fixed at $1 – found itself in a bit of a pickle as it revealed that it has about $3.3 billion of its cash reserves in SVB. One can reasonably predict that upon hearing this news, stakeholders and investors alike were over the edge with panic, and this caused the USDC to plummet sharply. Despite initiating withdrawal proceedings, attempts to retrieve the funds have proven ineffective. However, many remain optimistic because the Federal Deposit Insurance Corporation in the United States has to salvage the bank and its activities. It also did not help that SVB’s crash came shortly after Silvergate – a cryptocurrency back – announced its winding up. Notably, several other companies have been affected by SVB’s crash
What are the Implications of the Bank’s Crash on the Cryptocurrency Marketplace
Since the news of the SVB crash, people worldwide have been left with one question: what does the SVB crash imply for major crypto venture capitals? At the initial stage of the collision, there was an unprecedented switching craze. Persons sought to remove their cryptocurrency investments in particular ventures and liquidate them. Fortunately, many have seen cryptocurrency as a safe haven as the market only recorded a minute slump and is back up again, showing more healthiness than many centralized financial institutions. On its part, Circle has promised to make all efforts to reimburse the funds deemed lost. It looks like the company has made a comeback, as the USDC has returned to the original price of $1
Conclusion
Undoubtedly, crypto currency venture capitals were poorly hit by SVB’s crash. Various companies are grappling with the remains of the effects of the impact. However, it would seem that some are beginning to recuperate without permanent damage to the reputation of cryptocurrency. At this time, one can only wait to see how it all plays out.
