How Could SVB's Collapse Affect Tech & Crypto?
Interoperability | Aurora Pass Wallet | Comdex DeFi infrastructure layer | Silvergate collapse | Squid & EigenLayer
GM Intels, this is your Daily Bolt. As you may have seen on your twitter timeline: Silicon Valley Bank, a bank with ~$200b in deposits recently collapsed and has consequently been shut down by authorities, spelling trouble for financial markets.
The crypto market’s reaction was anything but stable, as per usual…
We go over the latest developments and more in today’s edition. Keep a close eye out for additional coverage on our platform.
Over and out.
Key Discussions Happening Today
1/ Bankless - Sergey Gorbunov and Francesco Renzi on Interoperability
Preview: Sergey Gorbunov and Francesco Renzi join to discuss interoperability, chain fatigue, streaming payments and more. Click here to listen to the full episode.
Length: 24 | Our Note: 2 mins
Here are some key takeaways:
Axelar is a decentralized network that is responsible for connecting different ecosystems and moving messages across them.
They have layers of services built around it like relayers, routing and gas services.
Superfluid (a Cosmos staking model built by Osmosis Labs) enables you to make one transaction on-chain which initiates a recurring payment that happens every second.
2/ Aurora Weekly Updates #73
Preview: Alex Shevchenko discusses this week’s latest updates on the Aurora ecosystem. Click here to listen to the full episode.
Length: 10 | Our Note: 2 mins
Here are some key takeaways:
Aurora announced the Aurora Pass which is an upcoming iOS and Android mobile-first Web3 wallet.
Whalecointalk conducted an AMA with Alex.
Aurora Hunter announced new dApps on DappRadar.
3/ Band Protocol Twitter space - AMA with Comdex
Preview: Leon and Siddarth of Comdex join to discuss their infrastructure, partnership, inspiration to build, and more. Click here to listen to the full episode.
Length: 42 | Our Note: 3 mins
Here are some key takeaways:
Comdex is a DeFi infrastructure layer for the Cosmos ecosystem.
They have 3 products that are live which are their stablecoin protocol called Harbor, a lending and borrowing protocol called Commodo and their DEX called cSwap.
Band Protocol will help them unlock the opportunity to go cross chain or expand into more chains.
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4/ Coin Bureau - Silvergate Bankruptcy
Preview: Guy discusses Silvergate, collapse, what comes next and more. Click here to listen to the full episode.
Length: 21 | Our Note: 5 mins
Here are some key takeaways:
Alan Lane turned Silvergate’s focus to crypto after investing in Bitcoin in 2013.
Silvergate wanted to create a stablecoin of their own.
When the market started crashing in early 2022, Alan started getting questions from all sides about the bank’s solvency because Silvergate offered $USD loans backed by $BTC.
5/ Bankless - Fig & Sreeram Kannan on EigenLayer & Squid
Preview: Fig of Squid Router and Sreeram Kannan of EigenLayer join to discuss interoperability solutions, squid, EigenLayer and more. Click here to listen to the full episode.
Length: 32 mins | Our Note: 2 mins
Here are some key takeaways:
Squid is a cross chain swap which allows you to swap any token from one chain to another.
It’s built on Axelar’s general message passing or GMP which allows you to call a contract on any chain but you can also swap into a currency on any chain.
Some of the major ZK teams are interested in having thousands of roll-ups to the intermediate restake layer where the restake layer just checks the ZK proofs very fast.
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Note of the Day
Bell Curve Roundup - A Bank Run Saga: Silvergate and SVB
In this episode of Bell Curve, Mike, Jason, Vance, and Michael discuss Silicon Valley Bank, tech's primary bank which is in a downward spiral, how did this all start? What do these two banks have in common? And is this a systemic risk to the financial system?
Read our notes below to learn more.
Bank Runs: Silvergate and Silicon Valley Bank
Silicon Valley Bank provides banking services to tech startups, including venture debt and illiquid borrowing.
SVB recently sold off 80% of its available-for-sale securities at a loss of $1.8 billion, raising concerns about its liquidity.
Silvergate is a bank for the crypto industry and recently had to delay its 10K filing due to losses from selling fixed-income assets at a loss.
Both banks face challenges in a rising interest rate environment and a mismatch of duration in their portfolios.
Silvergate is working with Goldman Sachs to sell stocks in a secondary offering to meet withdrawal demands and fill the gap.
SVB's customer base of startups has been depleting their deposits, causing losses from bond sales and increasing customer withdrawals.
California's larger GDP compared to Canada makes this a significant event.
The economy may be facing challenges, with the chances of a recession starting in the summer seeming likely.
Consulting and private equity companies are struggling, while inflation may not be a big issue.
SVB's exposure to web3 has been linked to the bank's performance, and the fear trade and the great trade are prevalent in the market.
Large-cap banks are not supposed to trade like Dogecoin, and the banks' management may face criticism for their mismanagement of duration in their portfolios.
ETH Denver Narratives
ETH Denver had 35,000 registrants and 12,000 attendees, making it a massive event.
ZKs and privacy were pervasive topics, with many panels and discussions focused on them.
Roll-Ups, specifically ZK Roll-Ups, were prominent and talked about in many conversations, with projects like Celestia and Eigenlayer being mentioned frequently.
Ethereum was the main ecosystem in the narrative, but Cosmos was also mentioned, with people either loving or hating it.
There were no discussions about consumer stuff or NFTs, but there was a gaming section with some high-quality games that had good retention and lifetime value.
Coinbase’s Wallet-as-a-Service & Strategy
Coinbase has launched a Wallet-as-a-Service offering for developers to integrate cryptocurrency wallets into their applications, while also positioning itself as a crypto-native thin application layer on top of other services.
Coinbase has been praised for trimming its product offerings and focusing on key areas, such as launching its Base Chain and Wallet-as-a-Service, in the last three months.
The success of Coinbase's new offerings remains to be seen, and there are concerns that it may face competition from other exchanges and wallet providers.
However, it is speculated that corporates, such as Amazon, may indirectly help solve the wallet problem by adopting Coinbase's white-labeled wallet solution to get their customers into crypto.
Coinbase's broader strategy of disintermediating its core business will take time to play out, but it is seen as a step in the right direction.
Voyager’s Win, GBTC Update, and Politics
A judge overruled the SEC's initial action and allowed the sale of Voyager to go through to Binance U.S., which may be significant for future crypto regulation.
Companies have two options when faced with regulatory complaints: fight it out in court or settle.
There are ongoing battles between SEC and various companies on different fronts. The Grayscale vs. SEC case is progressing and may have an impact on the Bitcoin spot ETF.
The Biden administration proposed a slew of changes to the tax code, including a possible 40% capital gains tax, which is unlikely to pass.
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