Overnight collapse of two traditional banks provokes chaos.
On March 11, Silicon Valley Bank and Signature Bank abruptly went out of business, shocking the financial community. This set off events that affected millions of companies, VCs, and bottom-line investors. The depegging of several stablecoins from the US dollar, including USD Coin (USDC), USDD (USDD), and Dai (DAI), was one of this collapse’s most important consequences. The USDC-issuing corporation Circle revealed that SVB held $3.3 billion of its $40 billion in reserves, which led to the depegging of the stablecoins.
The financial community was shocked by this information, and many were concerned about the possible repercussions of these banks’ failure. However, US President Joe Biden immediately assured taxpayers they wouldn’t experience the pain. Depositors were swiftly protected by the federal government, ensuring they wouldn’t lose their money if the banks failed.
Additionally, Biden stated that those accountable for the bank’s failure would face the consequences. He swore to look into the situation and punish anyone at fault thoroughly. Many in the financial community, who had feared that the failure of these banks would go unpunished, cheered this announcement.
In finance, the failure of Silicon Valley Bank and Signature Bank was a significant development. These banks were reputable businesses with a sizable clientele and substantial assets. Several companies and people lost money due to the sudden collapse of these banks, which had far-reaching effects.
The effects of this incident, however, extended beyond individuals who were directly harmed by the failure of the banks. The cryptocurrency market was significantly disrupted when stablecoins were depegged from the dollar. Stablecoins are frequently used to transfer funds quickly and conveniently between various exchanges and platforms. The cryptocurrency market experienced significant uncertainty and volatility when stablecoins lost their peg to the US dollar.