[Weekly Xangle] Silvergate Announces Voluntary Liquidation, NYAG Labels Ethereum Security,

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Xangle Research
Xangle
Mar 13, 2023
Translated by elcreto

Xangle’s Take on the Market This Week

  • Another harrowing week has slammed crypto prices down—as the Fed continues to sound hawkish, Silvergate Bank decides to voluntarily liquidate its assets, the New York Attorney General sues KuCoin and alleges Ethereum is a security, and Huobi token takes a nosedive.
  • Bitcoin plunged 9%, trading below the $20,000 psychological support at one point.
  • Amid lingering fears of Silvergate meltdown resulting in liquidity drain, volatility may spread even further with a series of reports to come on jobs (10th) CPI (14th), and retail sales (15th).

 


Top Stories & Takeaways

 

Silvergate Announces Intent to Voluntarily Liquidate and Cease Operations

  • Once a California-based community bank focused on real estate deals, Silvergate has come to prominence with massive asset growth since it began providing services to crypto businesses, including Paxos and Coinbase.
  • Launched in 2017, the Silvergate Exchange Network (SEN) was particularly instrumental to the bank’s meteoric rise as the network became a popular choice for crypto companies seeking arbitrage opportunities.
  • FTX’s downfall resulted in the loss of $8.1B in deposits and a barrage of withdrawal requests from customers.
  • The bank has failed to cover the requests for withdrawal despite its efforts to sell long-dated bonds at a loss.

Xangle’s Take: Silvergate’s descent may become a major drag on the inflow of capital in the crypto universe as one of the gateways for institutional investors is now shut. A raft of concerns is raised over Signature Bank, which used to offer similar services to Silvergate’s, as Signature pares back its crypto exposure and cuts ties with two of its biggest customers, Binance and Kraken. Fundamentally, the root cause of this crisis was the size of the bank’s crypto exposure that spiraled out of control for a bank of this size to support fiat currency transfers. Remedying the fallout may require involvement of big banks.

Link: Bloomberg Report

 

NY Attorney General Alleges Ethereum Is a Security

  • New York State Attorney General Letitia James sued KuCoin for selling unregistered securities and called Ethereum a security on the 10th. 
  • The petition argues that ETH is a speculative asset that relies on the efforts of third-party developers in order to provide profit to the holders of ETH, according to a statement released by the NYAG’s office. Because of that, it added, KuCoin was required to register before selling those assets.
  • The lawsuit states that Ethereum is a security because: 1) the Ethereum Foundation had raised funding in ETH’s ICO and used it to fund the development of the network 2) the shift to PoS has allowed ETH holders to profit merely by participating in staking 3) the developers of ETH promoted it as an investment that was contingent on the growth of the Ethereum network.

Xangle’s Take: The news of NYAG calling Ethereum a security came on the heels of SEC’s February crackdown on Kraken’s staking service for selling unregistered securities. The move appears to be part of its attempt to keep pace with SEC’s regulatory initiatives to bring staking services under the regulatory purview as securities. Pinched from all sides, it needs to be watched closely whether other tokens will further be brought under the definition of a security as well as the morphing of regulatory landscape.

Link: CoinDesk Report

 


Mainnet

 

Cosmos V9 Lambda Upgrade Passed

The V9 Lambda upgrade will introduce the Replicated Security, allowing consumer chains to have their blocks produced by the validator set of the provider chain.

Link: #187 v9-Upgrade Proposal

 


DeFi

 

Lido’s $wstETH Comes to Polygon

Lido expands support for $wstETH, allowing it to be bridged to Polygon.

Link: Lido Official Twitter Thread | Xangle Events | Lido on L2: Third Edition - Polygon

 


NFT

 

The “Gitcoin Presents” NFT Collection Shoots Up

The FP of the Gitcoin Presents NFT collection has ripped higher amid the rumors of a link between the project and Vitalik Buterin.

Link: OpenSea - Gitcoin Presents

 

Yuga Labs to Launch “Second Trip” to Otherside

Yuga Labs is set to open the "Second Trip" to its Otherside metaverse on March 25 to 10,000 voyagers, including Otherdeed NFT holders.

Link: news.yuga.com

 


Regulatory Landscape

 

CFTC Chair Again Calls Ethereum a Commodity

CFTC Chair Rostin Behnam reiterated ETH is a commodity, which contradicts the view of SEC Chair Gary Gensler.

Link: Cointelegraph Report

 

Biden Proposes a 30% Tax on Electricity Used in Crypto Mining

According to the Greenbook, a provision that would impose a 30% tax on the costs of electricity used in crypto mining is included in the Biden administration’s 2024 budget proposal.

Link: CoinDesk Report

 


Macro/Industry/Corporate

 

Big Step Increasingly Likely in March FOMC

Fed Chairman Jerome Powell’s testimony to Congress on the 7th, which hinted at bigger rate hikes, has increased the likelihood of a 50-basis-point rate hike.

Link: CME FedWatch Tool

 

Silvergate Announces Voluntary Liquidation

Silvergate Bank is set to wind down operations and enter voluntary liquidation.

Link: Silvergate’s Notification of Late Filing to the SEC (PDF)

 

SVB Shares Crater on Capital Raise Announcement

Shares of Silicon Valley Bank Financial Group took a nosedive after it announced plans to raise an additional $2.25B to cover the losses from a haircut on sales of securities.

Link: CNBC Report

 

Huobi Token (HT) Price Plunges

The Huobi Token plummeted 93% in a flash crash on the 10th.

Link: CoinGecko – HT Price Chart

 

Mt. Gox Pushes Back Repayment Deadline Again

Mt. Gox has extended BTC repayment and rehabilitation deadlines to April 6.

Link: The Block’s Report

 

Coinbase Rolls Out WaaS

Coinbase has released B2B wallet service WaaS following the release of Base.

Link: Coinbase Products - Wallet as a Service

 

Meta Mulls a Decentralized Social Network

Meta is reportedly working on a decentralized social media platform.

Link: Reuters Report

 


Previous Xangle Weekly Reports

 

 

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