Nic Carter: The failure of three banks including Silicon Valley Bank may limit the liquidity of the crypto industry

03/13 03:51

According to CNBC, Signature and Silvergate were the two main banks for crypto companies, and nearly half of all U.S. venture-backed startups kept cash with Silicon Valley Bank, including crypto-friendly venture capital funds and some digital asset firms. According to Nic Carter of Castle Island Ventures, the government’s willingness to backstop both banks signifies that it’s back in the mode of providing liquidity, rather than tightening, and loose monetary policy has historically proven to be a boon for cryptocurrencies and other speculative asset classes. But the instability once again showed the vulnerability of stablecoins, a subset of the crypto ecosystem investors can typically rely on to maintain a set price. Stablecoins are supposed to be pegged to the value of a real-world asset, such as a fiat currency like the U.S. dollar or a commodity like gold. But unusual financial conditions can cause them to drop below their pegged value. “Bitcoin liquidity and crypto liquidity overall will be somewhat impaired because Signet and SEN were key for firms to get fiat in on the weekend,” said Carter, who added that he is hopeful that customer banks will step in to fill the void left by SEN and Signet. “There are very few options now for crypto firms and the industry will be strapped for liquidity until new banks step in,” said Carter.

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