Banking turmoil in the US: How the dapp industry evolves to meet the challenge
in the last days, markets were thrown into a wild ride when Silicon Valley Bank (SVB) officially crashed, leaving more than $15 billion in potential debt. The largest bank for tech startups, including the pioneering Web3 and native cryptocurrencies, Circle, were affected.
THE DECENTRALIZED SOLUTION
According to a report by DappRadar, confirming the rumors surrounding the insolvency of SVB, USDC, the second largest stablecoin, lost its peg as fiat-based collateral was compromised. This phenomenon was too reminiscent of the infamous crypto black swans of 2022, such as the Three Arrows Capital crash, the Terra Luna crash, and FTX.
When regulators rushed to cover SVB’s debt, USDC price plunged, causing widespread panic and uncertainty in the market. But fear not, as the resilient dapp and cryptocurrency industries have weathered stormy market conditions before.
However, the fall in SVB demonstrated that the industry remains highly correlated with macroeconomic events.
The SVB collapse had a significant impact on the DeFi ecosystem, which is particularly susceptible to market downturns and uncertainty. Following the bankruptcy of SVB and the divestment of USDC, the DeFi market experienced a 9.6% drop in its TVL, which caused a considerable sale and a decrease in TVL. The closure of SVB and Signature Bank had a further impact on market liquidity, leading to wild price swings and creating the perfect conditions for volatile price movements.
However, the cryptocurrency industry has proven resilient and market stability is gradually returning. The events of the last few weeks have underscored the need for sector more self-sufficient and less dependent on traditional banking infrastructure.
The cryptocurrency industry must find alternative ways to manage liquidity and fiat on-ramps, especially in the absence of real-time payment networks such as the Silvergate Exchange Network and SigNet.
The bankruptcy of SVB and Signature Bank has had a significant impact on the cryptocurrency industry, especially the dapp ecosystem. But the industry remains hopeful, and recent events have provided an opportunity for innovation and self-sufficiency. The cryptocurrency industry will undoubtedly continue to evolve and adapt, even in the face of systemic challenges.
The real-time payment networks provided by Silvergate’s Exchange Network and SigNet have played a critical role in managing liquidity and enabling essential transactions such as OTC trades, arbitrage, and stablecoin redemptions.
As the industry advances, it must seek alternative solutions to manage liquidity and fiat on-ramps to ensure its continued growth and stability in the face of potential market turmoil.