collateral

Circle CEO ‘able to access’ $3.3B of USDC’s reserves at Silicon Valley Bank

Circle’s earlier disclosure that $3.3 billion worth of USDC reserves were held with Silicon Valley Bank resulted in it losing market share to its competitor USDT.

Circle CEO and co-founder, Jeremy Allaire, confirmed that, as of March 13, the stablecoin issuer has been “able to access” its $3.3 billion of funds held with the collapsed bank, Silicon Valley Bank (SVB).

Speaking with Bloomberg Markets on March 14, Allaire said that he believed that “if not everything, very close to everything was able to clear” from the failed lender.

USD Coin (USDC) — the stablecoin issued by Circle — briefly de-pegged following news that $3.3 billion of its cash reserves were stuck on SVB.

The stablecoin’s dollar peg has since recovered, but mass redemptions of USDC have resulted in the market cap of the stablecoin dropping by nearly 10% since March 11 according to TradingView.

The market cap of USDC from March 8 to March 14. Source: TradingView

Meanwhile, throughout the same timeframe, USDC peer Tether (USDT) has recorded a slight increase in its market cap since March 11, climbing by over 1% to $73.03 billion.

Related: USDC depegged because of Silicon Valley Bank, but it’s not going to default

The temporarily locked funds had a significant effect on USDC given the $3.3 billion represented less than 8% of the token’s reserves according to its January reserve report released on March 2.

The report asserted USDC was over 100% collateralized with over 80% of the reserve consisting of short-dated United States Treasury Bills — highly liquid assets which are direct obligations of the U.S. government and considered one of the safest investments globally.

Circle ‘able to access’ $3.3B of USDC reserves at Silicon Valley Bank, CEO says

Circle’s earlier disclosure that $3.3 billion worth of USDC reserves were held with Silicon Valley Bank resulted in it losing market share to its competitor USDT.

Circle CEO and co-founder Jeremy Allaire says that since March 13, the stablecoin issuer has been “able to access” its $3.3 billion of funds held with the collapsed bank, Silicon Valley Bank.

Speaking with Bloomberg Markets on March 14, Allaire said that he believed that “if not everything, very close to everything was able to clear” from the failed lender.

USD Coin (USDC) — the stablecoin issued by Circle — briefly de-pegged following news that $3.3 billion of its cash reserves were stuck on SVB.

The stablecoin’s dollar peg has since recovered, but mass redemptions of USDC have resulted in the market cap of the stablecoin dropping by nearly 10% since March 11, according to TradingView.

The market cap of USDC from March 8 to March 14. Source: TradingView

Meanwhile, throughout the same timeframe, USDC peer Tether (USDT) has recorded a slight increase in its market cap since March 11, climbing by over 1% to $73.03 billion.

Related: USDC depegged because of Silicon Valley Bank, but it’s not going to default

The temporarily locked funds had a significant effect on USDC, even though the $3.3 billion represented less than 8% of the token’s reserves, according to its January reserve report released on March 2.

The report asserted USDC was over 100% collateralized with over 80% of the reserve consisting of short-dated United States Treasury Bills — highly liquid assets thatare direct obligations of the U.S. government and considered one of the safest investments globally.

Crypto-friendly bank ends loans backed by crypto mining rigs

After a bullish 2021, crypto miners sought loans to expand, which backfired following difficult market conditions in 2022.

The holding company for the crypto-friendly bank, BankProv, has revealed it is no longer providing loans secured by cryptocurrency mining rigs after writing off $47.9 million in loans primarily secured by them throughout 2022.

According to a Jan. 31 filing with the United States Securities and Exchange Commission (SEC), BankProv has nearly halved the proportion of its digital asset portfolio consisting of rig-collateralized debt since Sep. 30, 2022.

The bank held $41.2 million in digital asset-related loans as of Dec. 30 last year, consisting of $26.7 million worth of loans collateralized by crypto mining rigs, which “will continue to decline as the Bank is no longer originating this type of loan.”

The crypto mining industry has taken on huge amounts of debt during the 2021 bull market, often offering up mining rigs they own as collateral in order to lower their interest rates.

Liabilities of the top ten publicly listed crypto mining firms according to recent financial statements. Source: Luxor Technologies

The subsequent bear market starting in 2022 resulted in tough conditions for miners, and many were forced to sell the Bitcoin (BTC) mining rigs they owned to cover operating costs, causing mining hardware prices to plummet.

Related: Bitcoin miner Greenidge cuts NYDIG debt from $72M to $17M

Despite the falling prices, some banks that had issued mining rig-collateralized debt were forced to repossess some of the miners used as collateral.

According to a previous SEC filing, BankProv repossessed mining rigs in exchange for the forgiveness of $27.4 million in loans on Sep. 30, 2022, which resulted in an $11.3 million write-off for the firm.

The losses likely contributed heavily to its decision to stop issuing these types of loans, with Carol Houle, the chief financial officer of its holding company Provident Bancorp, noting:

“As we reflect on 2022, we are eager to take its lessons and emerge a better, stronger bank. Despite our 2022 losses, we enter 2023 well capitalized and well diversified.”

Binance CEO shares ‘two big lessons’ after FTX’s liquidity crunch

CZ took to Twitter on Nov. 8 sharing “two big lessons” that crypto companies should learn amid the downfall of crypto exchange FTX.

Binance CEO Changpeng “CZ” Zhao has shared his take on “two big lessons” to be learned from the FTX saga, saying cryptocurrency firms shouldn’t use their own tokens as collateral and should also keep “large reserves.”

In a Nov. 8 tweet, Zhao laid out two learnings after the significant “liquidity crunch” at FTX which has ultimately resulted in a non-binding letter of intent from Binance to acquire the struggling exchange.

Zhao shared that his first lesson is to ensure a firm’s collateral should not consist of a token that it has created, and claims his exchange’s token — Binance Coin (BNB) — has never been used as collateral for its services.

FTX’s liquidity issues appeared to have come after a Nov. 6 tweet from Zhao saying Binance would be liquidating its holdings of FTX token (FTT) following “recent revelations” related to reported ties between FTX and the trading firm Alameda Research showing the firm had significant FTT holdings.

While Binance does not currently disclose proof of what reserves it uses as collateral, Zhao mentioned in a Nov. 8 tweet that in an effort to be fully transparent Binance will soon provide proof of reserves, adding:

“Banks run on fractional reserves. Crypto exchanges should not.”

Zhao’s second lesson from the downfall of FTX is that crypto businesses shouldn’t be borrowing, and instead should opt to maintain large reserves — which could be in reference to FTX users complaining of sluggish withdrawals on Nov. 7, sparking rumors the exchange didn’t have enough to cover user funds.

Related: Bitcoin price hits 2-week lows as FTX ‘bank run’ drains BTC reserves

Zhao’s tweet confirming Binance’s FTT holdings liquidation ended up triggering what some called a “bank-run” on the exchange, with analytics platform CryptoQuant data revealing that FTX’s Bitcoin (BTC) balance had fallen by 19,956 on Nov. 7 alone.

At the time of writing, FTT is down 75% in the last 24 hours, with the last price around $5.70 at the time of writing compared to its opening price of $22.14.

Binance CEO shares ‘two big lessons’ after FTX’s liquidity crunch

CZ took to Twitter on Nov. 8 sharing “two big lessons” that crypto companies should learn amid the downfall of crypto exchange FTX.

Binance CEO Changpeng “CZ” Zhao has shared his take on “two big lessons” to be learned from the FTX saga, saying cryptocurrency firms shouldn’t use their own tokens as collateral and should also keep “large reserves.”

In a Nov. 8 tweet, Zhao laid out two learnings after the significant “liquidity crunch” at FTX, which has ultimately resulted in a non-binding letter of intent from Binance to acquire the struggling exchange.

Zhao shared that his first lesson is to ensure a firm’s collateral should not consist of a token that it has created and claims his exchange’s token — BNB (BNB) — has never been used as collateral for its services.

FTX’s liquidity issues appeared to have come after a Nov. 6 tweet from Zhao saying Binance would be liquidating its holdings of FTX Token (FTT) following “recent revelations” related to reported ties between FTX and the trading firm Alameda Research showing the firm had significant FTT holdings.

While Binance does not currently disclose proof of what reserves it uses as collateral, Zhao mentioned in a Nov. 8 tweet that in an effort to be fully transparent Binance will soon provide proof of reserves, adding:

“Banks run on fractional reserves. Crypto exchanges should not.”

Zhao’s second lesson from the downfall of FTX is that crypto businesses shouldn’t be borrowing and instead should opt to maintain large reserves — which could be in reference to FTX users complaining of sluggish withdrawals on Nov. 7, sparking rumors the exchange didn’t have enough to cover user funds.

Related: Bitcoin price hits 2-week lows as FTX ‘bank run’ drains BTC reserves

Zhao’s tweet confirming Binance’s FTT holdings liquidation ended up triggering what some called a “bank-run” on the exchange, with analytics platform CryptoQuant data revealing that FTX’s Bitcoin (BTC) balance had fallen by 19,956 on Nov. 7 alone.

At the time of writing, FTT is down 75% in the last 24 hours, with the last price around $5.70 at the time of writing compared to its opening price of $22.14.

Celsius moved $529M worth of wBTC to FTX exchange: Should we be worried?

The crypto community is concerned that the transfer could lead to the dumping of more than $500 million Bitcoin into the market.

Embattled lending platform Celsius has transferred nearly 25,000 Wrapped Bitcoin (wBTC), worth $528.9 million, to crypto exchange FTX, prompting concerns from some in the community about whether a dump may soon follow. 

The huge transfer to the exchange comes after the lending platform paid off its remaining $41.2 million of debt to Maker protocol, freeing up its loan’s entire wBTC collateral.

However, the community is unsure what to make of the transfer, with some fearing that a dump of the wBTC on the exchange could soon follow, pushing Bitcoin (BTC) prices down.

Others have been more hopeful that the move may be in preparation for Celsius to swap their Wrapped Bitcoin for BTC, which may be a good sign for depositors who’ve been hoping for Bitcoin withdrawals to eventually reopen on the Celsius platform. Bitcoin is up 8% in the past 24 hours to trade above $22,100, suggesting market participants are taking the news in their stride.

The 25,000 wBTC sent to FTX follows the news earlier today that 150,000 BTC may be potentially released into the market as Mt. Gox creditors get their BTC back after an eight-year wait.

So far, both Celsius and CEO Alex Mashinsky have remained radio silent about any movement of funds.

Crypto lawyer Joni Pirovich, principal of blockchain and digital assets, told Cointelegraph on Thursday that Celsius’ repayment of its loan position with Maker will ultimately assist its customers.

Related: Bombshell allegations of fraud as KeyFi takes Celsius to court

“Maker protocol relies on overcollateralized loan positions, so the loan repayment of $41 million worth of DAI released 21,962 wBTC of capital which is now available to meet customer withdrawal requests.”

Pirovich added that even if Celsius ends up filing for bankruptcy, repaying the loan position and withdrawing collateral could improve the position of customers:

“The question is what will Celsius do with the withdrawn collateral? Keep it in reserve for customers or risk it to trade and on-lend.”