The 16th largest bank in the U.S. with $209 billion in total assets, Silicon Valley Bank (SVB) which specialized in providing loans and services to technology companies, startups, venture capitalists and private equity firms was collapsed on March 10, 2023.
After some Venture Capital firms analyzed that the bank would fail, urged the customers to withdraw their money from SVB. This caused a liquidity crisis for the bank, failed meet its obligations. Sounds similar to the FTX collapse, doesn't it? Yes, it does, and we might see some similar ripple effects on other players in their respective sectors, such as tech companies, startups, venture capitalists, private equity firms, cryptocurrency projects, traders, investors, etc. These players could suffer losses or disruptions due to their association with SVB.
One example of such ripple effects is how USDC got affected by SVB collapse.
USDC is a stablecoin issued by Circle that aims to maintain a 1:1 parity with US dollar and is backed by reserves held in regulated banks including SVB.
Circle had $3.3 billion worth of USDC reserves in SVB at the time of its collapse and resulted a plunge in the price of USDC.
Some Crypto exchanges have announced the suspension of USDC conversions over the weekend as the SVB collapse sends shockwaves across the crypto space. They said that they will resume the conversions once banks open on Monday and Circle provides more clarity on its situation.