Stefano

#SVB #bankcollapse #Binance #crypto2023

What was the recent collapse of SVB about?

The recent collapse of Silicon Valley Bank (SVB), which was the second-largest bank failure in US history. SVB primarily served tech businesses and saw an increase in deposits due to low-interest rates. However, SVB faced a problem as banks typically make money through loans rather than deposits and low interest rates made it difficult to earn a significant profit. To counter this, SVB invested in US Treasury bonds to achieve a slightly higher interest rate on its loans. Unfortunately, interest rates hiked causing the value of SVB’s bond portfolio to plummet and their old US Treasury bonds now paid out lower interest rates.

This significant loss created a challenging situation for SVB as they had invested a majority of their depositors’ funds in long-term bonds that had significantly depreciated in value. In addition to this, the higher interest rates made it harder for tech businesses to borrow money which led them to draw upon their cash reserves at SVB. In the process of meeting their own liquidity needs, they drained SVBs.

Risks of having over $250,000 in a single entity bank account

It's essential to assess your risk by knowing how much your deposits are insured for and how easily and often you can withdraw; considering diversification by holding different asset classes or holding deposits in multiple banks; and doing your due diligence by researching before making any financial decisions. The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by Congress to maintain stability and public confidence in the nation’s financial system. The FDIC insures deposits; examines and supervises financial institutions for safety, soundness, and consumer protection; makes large and complex financial institutions. The FDIC protects and reimburses your deposits up to the legal limit of $250,000 if your FDIC-insured bank fails.

What happens to those that have more than $250,000 in an individual bank account?

Some wonder what happens if you have more than $250,000 in an individual bank account. However, If you have over $250,000 in individual accounts at one bank, the amount over $250,000 is considered uninsured and financial advisors recommend that you move the remainder of your money to a different financial institution. Another way to protect your money is to deposit it in different account categories or open accounts with different banks, essentially moving away and diversifying.

Simple tips for protecting your assesets/funds

 Some steps you can take include not clicking on attachments or links sent by unknown sources, never giving out your personal information like Social Security number or driver’s license number. Checking your bank account daily and credit card accounts at least once a month. Using strong passwords and two-factor authentication for all online accounts and being careful about where you access financial accounts. You can also keep your money liquid by investing in various types of banking products or fixed-income securities backed by large stable organizations like corporations and the government or in stable and well diversified platforms such as Binance.

#BTC #Ethereum #crypto2023 #Binance

What is Blockchain?

Simply put, the blockchain is a database. It is a database that contains specific data and it's constantly growing. Blockchain has a very important role:

1. Once the data is stored in the database, it will never be modified or deleted. Every record on the blockchain is permanent.

2. It is not an individual or organization that maintains the database; it is maintained by thousands of people, and everyone has their own copy of the database.

So, how do you keep everyone's copy of the database in sync? Suppose there are ten people in the network, and everyone has an empty folder and a blank page. Whenever someone performs an important operation on the network, such as transferring funds, they will broadcast this to everyone in the network.

Everyone records on the page until the page fills up. When it is full, everyone needs to confirm the content of the page by solving math puzzles. Solving math puzzles can ensure that everyone’s page has the same content and will never be modified. Those who complete it first will receive a certain amount of cryptocurrency.

Once the page is confirmed, it will be added to the folder, and then a new page will appear, continuing the process.

Blockchain

Over time, pages (blocks) containing important records (transactions) will be added to the folder (chain) to form a database (blockchain).

What is stored in the blockchain?

Blockchain can be used to store any type of data, and the data in it has a certain value. Bitcoin's blockchain stores financial transaction records. Bitcoin's role is similar to that of currencies such as the U.S. dollar, while Ethereum is different.

Ethereum is not just a currency such as the U.S. dollar or British pound. Ethereum is an ecosystem which can be used for building applications non-fungible tokens and even other cryptocurrencies, etc.

What is the Shanghai Upgrade of ETH?

The Shanghai upgrade is a technical upgrade to the Ethereum network. It will enable Ethereum stakers to withdraw their staked ETH for the first time since staking went live in December 2020. Relative to “The Merge,” Shanghai is a minor technical upgrade, but from a price perspective, it could be a big deal as theoretically all of the $33B worth of staked Ethereum could be withdrawn.

How will the Shanghai Upgrade Impact Ethereum?

The Shanghai upgrade of Ethereum will enable withdrawals of staked ETH for the first time since staking went live in December 2020. While theoretically, $33B worth of staked ETH could be withdrawn and sold, the chances of a Shanghai-induced ETH sell-off are slim. In fact, Shanghai should result in more ETH being staked over the coming months. Most stakers will withdraw their staked ETH rewards but hold onto their staked ETH deposits. Any ETH sell pressure induced by Shanghai should be minor and enabling withdrawals is expected to result in more, not less, ETH being staked over the coming months: a bullish catalyst for Ethereum and ETH.

What is proof-of-stake?

Proof-of-stake was enabled in September of 2022 which replaces proof-of-work (PoW) also referred to as mining, where millions of computers facilitate the transactions of the network. Proof-of-stake (PoS) is a consensus mechanism used by some blockchain networks to achieve distributed consensus. In a PoS system, validators (i.e., nodes that create new blocks and validate transactions) are chosen randomly from among those who have staked their cryptocurrency. The more cryptocurrency a user stakes, the higher their chance of being chosen as a validator and earning rewards. This system creates an incentive for users to hold on to their coins and helps to secure the blockchain against fraudulent activity.

What are staked ETH deposits?

Staked ETH deposits refer to the process of depositing or “locking up” a certain amount of ETH to activate validator software on the Ethereum network. Validators help Ethereum reach consensus by proposing new blocks or verifying and attesting to the validity of blocks proposed by others. By staking their ETH, users can participate in the operation of the Ethereum network and earn rewards.  Staked ETH deposits refer to the ETH that has been staked or locked up by users to support the operation of the Ethereum network. The Shanghai upgrade will enable Ethereum stakers to withdraw their staked ETH for the first time since staking went live in December 2020.

Conclusion

The Shanghai Upgrade is actually positive for the blockchain. Enabling withdrawals “de-risks” staking and should result in more ETH being staked post-Shanghai. Depending on the economic data the Shanghai Upgrade seems bullish/positive for Ethereum.

#Binance #crypto2023 #Dapps #developers

Ethereum's usability case

The leading dApps blockchain at this current stage is clearly Ethereum. Ethereum has expanded on Bitcoin’s decentralized digital currency by building a global network that undergirds an interconnected marketplace of decentralized applications (dApps). Ethereum’s use cases are vast and expanding fast, offering blockchain projects enhanced efficiency, security, and decentralized equity to industries across the globe. The article goes on to describe some of the major use cases that have arisen on Ethereum so far including Decentralized Autonomous Organizations (DAOs), Initial Coin Offerings (ICOs), Enterprise Ethereum, Non-Fungible Tokens (NFTs), Stablecoins and Decentralized Finance (DeFi). The article concludes by stating that with its flexibility and robustness, new applications continue to emerge on Ethereum and increased scalability in the future will continue to support development.

What is DeFi?

Decentralized finance (DeFi) is a recent innovation with an avalanche of use and growth on Ethereum. DeFi platforms are reinventing traditional financial products and services by adding programmable, decentralized, and censorship-resistant features to create brand-new financial products. For example, DeFi platforms offer peer-to-peer (P2P) borrowing and lending, interest on crypto holdings, decentralized exchange (DEX) mechanisms, stablecoins, and composable features that maximize passive earning opportunities. Popular DeFi platforms include Compound, MakerDAO and Aave. In 2020 the total value locked in DeFi platforms eclipsed $4 billion 

Further elaborating on P2P borrowing DeFi

P2P borrowing in DeFi refers to peer-to-peer lending and borrowing of cryptocurrency assets on decentralized platforms. These platforms enable crypto users to deposit their assets for lending and borrowers can take a loan using a decentralized platform called P2P crypto lending. Lending and borrowing in DeFi platforms are real peer-to-peer transactions without intermediaries. This allows lenders to earn interest on their loaned assets while borrowers can access loans without going through traditional financial institutions. Interest rates on P2P loans in DeFi can vary depending on the platform and the creditworthiness of the borrower.

Risks of P2P borrowing DeFi

With each financial endeavour, there are always risks associated. . One of the biggest risks is credit risk, as P2P loans are exposed to high credit risks. Another risk is that there is no insurance or government protection for lenders in case of borrower default 1. Additionally, some jurisdictions do not allow P2P lending or require companies that provide such services to comply with investment regulations. There are risks and potential rewards associated with decentralized finance (DeFi) lending. There is a potential for high returns through DeFi lending but also cautions readers about the associated risks.

One of the key risks is impermanent loss, which occurs when the price of assets locked up in a liquidity pool changes after being deposited. This can result in an unrealized loss for liquidity providers. There are also flash loan attacks and rug pulls as other potential risks associated with DeFi lending.

Impermanent loss occurs due to the way DeFi pools maintain a ratio of assets in the pool. For example, an ETH/LINK pool might fix the ratio of ether and link tokens in the pool at 1:50 (respectively). When arbitrage traders flood the pool with one token in order to remove another token that is discounted, it changes the ratio of coins. In order to regain balance, the liquidity pool automatically increases the price of one token and reduces the price of another token to encourage arbitrage traders to rebalance the pool. Once rebalanced, however, it often results in an impermanent loss for liquidity providers.

#Binance #crypto2023 #bank #bearorbull

The challenges faced by crypto companies in finding banking partners have been an outgoing issue. For instance, Binance has issued a statement saying withdrawals and deposits of pound sterling will be withdrawn. However, users will be able to access their funds. The issue is due to the UK's unfavourable law system making it challenging for Binance's payment provider to operate in Britain. The crypto industry relies on banks to accept dollar deposits and make payments. However, many banks have been reluctant to work with crypto companies due to the perceived risks. Two US banks, Silvergate and Signature, had become important partners for the crypto industry by offering real-time payments outside of traditional banking hours. However, both banks have recently closed due to overexposure to the ailing crypto sector and a liquidity crisis triggered by a sudden flood of withdrawals. While crypto companies have long sought to distance themselves from traditional finance, they still rely on banks to accept dollar deposits and make payments. However, many banks have been reluctant to work with crypto companies due to the perceived risks.

The recent collapse of three crypto-friendly banks has left many blockchain-linked firms without banking partners and few alternatives. Two of these banks, Signature Bank and Silvergate Bank, were known for their longstanding relationship with the sector. Many crypto exchanges quickly had to find new ways of getting money on and off their platforms, while others sent funds to offshore banks that were seemingly more willing to do business.

Circle Internet Financial Ltd., which operates the USDC stablecoin, was particularly affected by the collapse of Silicon Valley Bank. Around $3.3 billion of cash backing its token was stuck for days in the now-defunct Silicon Valley Bank, causing USDC to temporarily lose its dollar value and knocking its reputation as one of the more reliable crypto assets. Circle has since moved 100% of its cash to Bank of New York Mellon.

The closure of these two banks has left many crypto businesses without banking partners and few alternatives. Some businesses have turned to offshore banks that are more willing to work with them. Others have had to find new ways of getting money on and off their platforms.

Some in the sector think that there is a coordinated effort underway inside the US’s top banking echelon and its regulators to eradicate digital assets from finance. However, it may be more about risk management as the digital-asset industry has had its share of wild swings, scams and blowups. Thus some resort to decentralized cryptocurrency exchanges however there are other concerns about safety and security.

Cryptocurrency prices stumbled Wednesday along with the stock market as Credit Suisse plummeted in the latest chapter of the banking crisis.

Cryptos rallied Tuesday as regulators made moves to contain potential contagion. Bitcoin and Ethereum retreated Wednesday after skyrocketing to their highest levels in months Tuesday.

On Sunday, Signature Bank was shuttered by state regulators and turned over to FDIC control. Roughly 30% of Signature Bank’s deposits came from crypto customers.

Over the weekend, the stablecoin USD Coin briefly lost its peg to the dollar and fell to 86 cents on Saturday. USDC rebounded to reclaim its government peg Monday.

The US Federal Reserve announced a US$25B fund to support liquidity-troubled banks.

South Korea launched a Metaverse Fund and SWIFT saw positive results in its pilot test of linking different CBDCs.

Last week’s crypto market prices were down -7.46%. Volume and volatility increased by +28.20% and +62.80%, respectively. Bitcoin was flat at -0.3% while Ethereum rose slightly by +2.5% in the past seven days.

Top Facts

By market value, Bitcoin, the biggest altcoin in the world, reached its highest price on Tuesday at $26,490! BTC has increased by 12% over the past week and by 39.5% over the past 90 days.

By market value, Ethereum (ETH), the second-largest cryptocurrency in the world, was selling at $1,784 on Tuesday, up 9% over the previous week. In the past ninety days, Ethereum has increased 30%.

Following the failure of tech lender Silicon Valley Bank and cryptocurrency-friendly bank Silvergate on Friday, prices for both coins dropped to almost two-month lows. On March 11th, for instance, Bitcoin dropped to $19,546 and Ethereum to $1,369, respectively.

The price of Stablecoin USD Coin (USDC) has returned to almost $1 at $0.999.

#SVB #bankcollapse #Binance #crypto2023 #BTC

Why did Silicon Valley Bank Collapse?

After a hectic 48 hours in which clients frantically withdrew savings from the lending institution in a traditional run on the bank, SVB abruptly collapsed. However, the cause of its downfall has been simmering for a while. Like numerous other financial institutions, SVB poured billions into US government assets during the period of near-zero interest rates. As the Federal Reserve aggressively increased interest rates to control inflation, what initially appeared to be a secure wager soon unraveled. Bond values decline as interest rates rise, so the increase in rates reduced the worth of SVB's bond portfolio. The collection was producing an average 1.79% return last week, far below the 10-year Treasury yield of around 3.9%. At the same time, rising financing costs were a result of the Fed's rate hikes.

What the US President Did to Protect the Financial Markets?

With the collapse of US Silicon Valley Bank and US President Joe Biden's subsequent attempt to convince consumers that the US financial system was safe, bank stocks throughout the world plummeted. This comes after US authorities were forced to intervene to preserve consumer deposits following the bank's failure.

Joe Biden has committed to go to whatever length to safeguard the financial sector.

But, investors are concerned that the impact would affect other lenders, sending global share values falling.

Despite promises to clients that they had enough liquidity to defend themselves against shocks, a handful of smaller US banks incurred even larger losses than European banks.

Will Depositors and Investors be Covered?

The deposits of all Silicon Valley Bank clients will be guaranteed, US authorities announced on Sunday. The action aims to stop further bank runs and assist tech firms in continuing to pay employees and finance their operations. On March 9, 2023, Silicon Valley Bank's offices will be located in Santa Clara, California, in the US. Bonds issued by SVB Financial Group are falling along with its stock as a result of the company's decision to increase capital following losses on its securities holdings and a decrease in financing. US authorities state that as a second bank fails, SVB clients will be compensated. But because the action falls short of a rescue in the mold of 2008, holders of the company's shares and bonds won't be covered.

How HSBC UK Saved the Day in Britain

With its intervention on Monday, HSBC secured the assets of thousands of British tech firms by purchasing SVB UK for £1 ($1.2). If a buyer hadn't been located, the Bank of England would've declared SVB UK insolvent, rendering clients with only guaranteed deposits valued up to £85,000 ($100,000) or £170,000 ($200,000) for joint accounts. The deal "strengthens our commercial banking franchise and enhances our ability to serve innovative and fast-growing firms, including in the technology and life science sectors, in the UK and internationally," said HSBC CEO Noel Quinn in announcement.

#Binance #crypto2023 #smartcontracts #BTC #ETH

What can smart contracts do?

Suppose we bet on the weather conditions for tomorrow. I bet it will be sunny tomorrow, and you bet it will be rainy. We agreed that the loser must give the winner £100 pounds. So how do we ensure that the loser will keep the promise? There are three common ways:

1. Mutual trust

The easiest way is to trust each other. If we have been friends for many years and know each other well, it is easy to trust each other. But if we are strangers, it will be troublesome. It is difficult for us to trust each other.

2. Sign a legal agreement

Another way is to sign an agreement for our bets. It specifies the terms of the bet in detail, including what happens if the losing party violates the agreement.

The agreement can ensure that the losing party pays the winner, but this is unrealistic because reaching an agreement through legal means is more costly than a bet.

3. Seek help from mutual friends

We can also find a friend who trusts each other and let the friend take care of £100 pounds. Pay £100 pounds to the winner when the answer is revealed. But what if this friend ran away with the money?

Now we have three different methods, but each has its shortcomings. It is difficult for strangers to trust each other. Legal agreements are expensive and friends might not fully trust each other.

At this time, Ethereum's smart contracts come in handy. Smart contracts are equivalent to mutual friends of both parties, and they are written in code. Ethereum allows us to write software that allows both parties to pay £100 worth of ether, check the weather with the weather API the next day, and then transfer £200 worth of ether to the winner. Once the smart contract is written, it cannot be edited or modified. Therefore, no matter what is specified in the contract, it will be executed.

Simply put smart contracts are a computer program or transaction on a decentralized platform.

But how is the smart contract executed? What does it have to do with the blockchain?

What is the relationship between smart contracts and blockchain

When executing a smart contract, it records the execution information on the block as a transaction. Transactions on Ethereum are like this: Among them, "data" is used to record the creation and execution of smart contracts, which are called transactions. Any block on the Ethereum blockchain can contain the following three types of transactions:

1. Ether transactions between users

This is a regular Bitcoin-style transaction within the network. If you send Ether to your friend, the data field will be cleared.

2. Ether transaction with no receiver

If there is no receiver in the transaction, it means that the purpose of the transaction is to create a smart contract in the network using the content of the "data" field. The software code contained in the "data" field will be consistent with other users in the network

3. Ether transaction between user and smart contract

When a user or a smart contract wants to execute a smart contract, they must trade with the smart contract and place the execution instruction in the data field.

Just like other blockchains, as long as any of the above transactions are sent, they will be broadcast to the entire network, allowing each node to record. In addition, each node will also execute the indicated smart contract to keep its EVM state in sync with the network.

Each execution will be permanently stored in the blockchain.

What is Gas fees?

As mentioned above, users must pay a certain fee when executing smart contracts. This part of the cost will be paid to the nodes that consume memory, electricity, storage, and calculations, and the unit of cost is called gas. Finally, the gas is converted into Ether according to the exchange rate.

When you execute a smart contract, you must define the maximum amount of gas to be consumed. When the execution is complete or the gas value is reached, the execution will stop. This is to avoid the infinite loop in the smart contract and prevent the program from being stuck and unable to continue execution.

Conclusion

Ethereum is not just a tradable cryptocurrency, its true value lies in its purpose, and the scalability, however there are other cryptocurrencies such as Bitcoin, Ravencoin or Alephium which promise to be more efficient. However that is to be determined.

#Binance #crypto2023 #BTC #cryptocurrency

The Federal Reserve Chairman Jerome Powell delivered a speech on current economic circumstances and the FED's attempts to reduce inflation through rate increases and fiscal policies. The statements are usually significant because they may provide a lot of insight into what the FED is thinking and how they might proceed with impending rate rises. The rises can have a significant impact on markets, therefore any word about the markets can create significant fluctuation and uncertainty:

Substantial turnaround in consumption and expenditure following a period of contraction.

The Fed is determined to increase borrowing costs further if data warrants it.

Inflation will most certainly continue, although at a slower pace.

Although the numbers do not indicate quite so many rate rises, more is necessary.