85th Edition

Mar 18, 2023

Greetings, fellow hodlers! Welcome to the Flippening, the crypto newsletter that's hotter than a freshly-mined Bitcoin.

Disclaimer: All price movements are recorded up to 03:30 PM UTC, 17th Mar 2023

While the stock market fell flat on its face following the SVB collapse, the rally cryptocurrencies have seen this week would make bull markets jealous.

Crypto simplified

The collapse of the Silicon Valley Bank was observed to be beneficial to Bitcoin. It seems crazy, but researchers have drawn parallels between something similar that happened way back in 2013.

So what happened back then?

➡️It turns out that in 2013, a massive financial crisis erupted in Cyprus, a small island nation in the eastern Mediterranean. The crisis was triggered by the exposure of Cypriot banks to the Greek debt crisis, which had started in 2009 and led to bank losses.

🤯The Cyprus crisis of 2013 triggered a surge in Bitcoin prices as Euro and Russian Ruble holders diversified into cryptocurrency.

How does SVB fit into this picture?

🏦The problem is the failure of an established trusted entity. Customers’ funds are not as safe in regulated banks as previously believed, leading to increased interest in the self-custody of funds.

In the case of SVB, U.S. regulators took control of deposits and shut down the bank. This episode highlights the appeal of Bitcoin as a decentralized peer-to-peer network and seizure-resistant cryptocurrency facilitating the self-custody of funds.

Bitcoin saw a 15% increase since last weekend amidst the uncertainty in the banking sector, highlighting the cryptocurrency’s potential as a safe haven asset during financial crises.

🚀 Crypto app downloads rose 15%

Mobile applications of the top 10 crypto applications for exchanges and wallets saw downloads rise about 15% since Silicon Valley Bank’s stock started dipping, according to a chart from real-time app data provider Apptopia.

The collapse of Silicon Valley Bank has once again proven the importance of having a decentralized financial system. Just as the Cyprus crisis of 2013 drove investors towards Bitcoin, the recent SVB incident has reminded us of the potential risks of centralized banking and the benefits of self-custody.

Top Highlights of the Week

1. Fulfilling the prophecy

Ethereum layer-2 scaling solution Arbitrum announced an airdrop for its token, ARB, that will go live on March 23rd, 2023. 11.6% of the entire 10 billion supply will be reserved for individual user addresses.

Our takeaway: This airdrop is bound to pique the interest of the bulls and cause an influx of liquidity into the crypto industry. While there's no dearth of competition in the layer-2 blockchain game, Arbitrum's an outright leader with over 55% of the market share. And it's crushing the numbers game in more ways than one- daily transactions on Arbitrum outnumber those on Ethereum. What's more, it's got Polygon beat by a mile in terms of TVL as well; keep in mind Arbitrum achieved these feats long before the airdrop announcement.

2. That was a close call

Silicon Valley Bank’s unforeseen collapse affected a lot of major players in the industry. Circle, the organization that issues USDC, was one of them. Once investors learned that a portion of Circle’s funds were held in SVB, there was a mad rush to redeem their USDC, leading to the stablecoin losing its peg to the US Dollar. At one point, it dropped to as low as 86 cents.

Our takeaway: Circle was quick to perform damage control, acknowledging the exact amount it held in SVB ($3.3 billion, FYI) while also promising to promptly return all user funds. And while this by itself might not have been enough, the US government's intervention helped prevent what would've been a near-fatal blow to the consumers' trust in cryptocurrencies. See where we're going with this? It all comes back to regulations. It is the need of the hour. And the sooner we get proper regulations, the better.

3. Bitcoin's feeling the wind in its sails

The overall crypto market registered gains over 5%, sitting at $1.14 trillion at the time of writing. This follows the stock markets bouncing back after a week of being down in the dumps after the SVB collapse. The stock market recovery can be attributed to major lenders like JP Morgan pooling in $30 billion to save the First Republic Bank from insolvency, promoting risk-on sentiments in the market.

Our takeaway: The macroeconomic conditions are in Bitcoin's favor, with the Federal Reserve likely to let interest rate hikes take a back seat following SVB's unforeseen demise. Interest rate hikes and Bitcoin prices share an inversely proportional relationship, as investors turn away from riskier assets when borrowing money becomes an expensive ritual. And right now, the market is counting on interest rates taking a dip.