It is worth noting that the collapse of Silicon Valley Bank was the second biggest collapse of a financial institution in US history. According to sources, SVB was one of the twenty largest US commercial banks, with the equivalent of $209 billion in total assets at the end of 2022.

Analysts note that Silicon Valley Bank is the largest lender to fail, following the collapse of Washington Mutual in 2008. From this it can be concluded that many people and companies received money from the bank, and now their fate in the short term remains uncertain.

First, however, we need to get to the bottom of what happened to the bank in the first place. A tweet from a well-known user called Balaji, who now has 753,000 followers, will help.

Here is the list of events that led to the current state of affairs.

• For starters, the government set up fake financial accounting rules. They allowed banks to tell customers they had money when in fact they didn’t.
• Then the Fed suddenly raised interest rates to the sky, which happened after holding them near zero for several years. In addition, prior to that the banking system did not recognize the problem of inflation, and called it a short-term phenomenon.
• As a result, banks that were buying government bonds because of misleading statements of the Fed were in a deadlock. Skyrocketing interest rates mean that government bonds bought months ago have now depreciated significantly.

As the author of the Balaji account points out, this is why SVB customers’ money has essentially disappeared from their accounts. Yet their capital was used to buy bonds from the government, and when they rushed to withdraw the money from their accounts, there were not enough resources. As a result, it was announced last night that Silicon Valley Bank was shut down by the California Department of Financial Protection and Innovation, which also appointed the Federal Deposit Insurance Corporation (FDIC) as the bank’s administrator.

Initially the bank representatives tried to find a buyer for their own company, but now the only hope for the bank is obviously the help of the state. The scale of the possible problems is enormous, as Silicon Valley Bank has served almost half of America’s start-ups.

Here’s a comment from an investor called Leshner whose acquaintances have already been affected by what’s happening.

I know a lot of startups whose funds are stuck in SVB. It’s a huge, huge problem, and I’d like to believe that the situation won’t affect salaries and operations. Hopefully the bank will be bought out over the weekend. And when the dust settles, these events will be the catalyst for building an anti-fragile financial structure.

Above all, experts fear that the current situation will lead to a lack of resources to run the company’s operations. Still, this would mean a lack of wages, massive layoffs and a serious blow to the economy as a whole. As we have already noted, SVB bank has more than enough clients, and many of them are paying off mortgages and conducting other usual activities. And this affects all areas of human activity.

What happens to Silicon Valley Bank?

Now let’s look back at the events of recent days. On 9 March 2023, SVB shares fell by more than 60 per cent and the firm’s capitalisation fell by $10 billion. This came after the institution announced a $1.75 billion float of almost all of its securities. Consequently, the institution faced a shortfall in finances, which in turn caused panic among customers and massive attempts to withdraw funds from there.

Ahead of today’s news, various funds like Peter Thiel’s Founders Fund, which has invested in Stablecoin issuer Paxos and former trading firm Tagomi, have also advised their companies to withdraw money from the startup-focused bank.

SVB’s cryptocurrency industry venture capital clients, represented by Andreessen Horowitz and Sequoia Capital, are yet to comment to Decrypt journalists on the incident. Paxos representatives are also refusing to give their assessment.

Eliezer Ndinga, director of 21Shares’ research department, shared his analysis of the situation. Here is the relevant rejoinder from the expert.

This could affect the crypto industry to some extent – most likely start-ups offering existing products and services in various sectors along the lines of financial technology, while using public blockchains or other elements of a similar technology stack.

Earlier this week, it was revealed that another bank known to be important to the crypto industry is going out of business. We’re talking about Silvergate: on Wednesday, the bank announced it was “winding down operations” after it incurred large losses selling bonds to pay depositors who “didn’t survive” the bearish trend of 2022.

Perhaps what is happening with Silvergate and SVB is related. SVB president and CEO Greg Becker told investors that the aforementioned measures were taken to strengthen the bank’s finances to survive the recent venture capital crisis. Still, the bank expects “further increases in interest rates, pressure on public and private markets, and an increased level of cash burn by our clients as they invest in their businesses”.

US billionaire Bill Ackman said on Twitter that the collapse of the SVB could “destroy an important long-term driver of the economy” as many venture capital firms rely on the bank to hold money and get loans.

Why the USDC from Circle fell

Money at Silicon Valley Bank has been held by cryptocurrency companies, among others. Tonight it was revealed that Circle, which issues USDC Stablecoin, holds 8 per cent of its reserves there. We’re talking about $3.3 billion of the $40 billion in reserves.

Given what's going on, it turns out that the USDC stablcoin is not fully collateralized - at least at the moment, when Circle can't access its own money. This has led to a panic in the industry and the decoupling of USDC from the dollar exchange rate.

As the Coingecko chart shows, the USDC exchange rate has among other things dipped to 87 cents, which is the lowest the token has ever been.

According to analysts, out of Circle’s total reserves of $43.2 billion, there is $11.4 billion in cash in banks. This amount is spread across seven banks, which included the troubled Silicon Valley Bank and Silvergate. Here is the corresponding chart for clarity. The cash here is highlighted in black.

USDC’s drawdown is being contributed to by traders who are shorting USDC’s stablcoin. However, the token also has plenty of other problems. In particular, Coinbase today suspended USDC to dollar transfers over the weekend while banks are closed. Also, cryptocurrency exchange Binance has temporarily disabled the automatic USDC to BUSD conversion feature, which had been in place since autumn 2022.

To be fair, the USDC-to-Dollar withdrawal mechanism from Circle is working. This can be seen in the number of USDC tokens burned. For example, overnight cryptocurrency exchange Coinbase withdrew at least 850 million USDC. Jump Crypto giant did the same.

It is also worth noting that the lack of ties with Silicon Valley Bank was confirmed by representatives of Binance, Solana and WOO Network.


The collapse of a major bank is not just a problem for the cryptocurrency industry, some of which have their money in Silicon Valley Bank accounts, but for the global economy as a whole. Yet, as noted, the bank serves a huge number of start-ups with a large number of employees. If they can't get paid, the economy will suffer a serious blow. Therefore, they do not have to rely on a trivial restoration of the USDC's link to the dollar, but on a buyout by another company or help from the government. Otherwise, the consequences of an SVB collapse will be felt everywhere, not just with stabelcoins.