Here is a brief update answering common questions from CoinLoan users. We will provide more information as soon as it becomes available.

How did CoinLoan get to this point? Where did the money go?

This situation has resulted from a steep market decline – the longest and still ongoing crypto winter. A massive bank run in 2022 triggered by a string of high-profile bankruptcies (Celsius, 3AC, Voyager, FTX, BlockFi, and others). It affected CoinLoan's liquidity, causing an imbalance between the inflows and outflows of users' funds for 300 days in total.

Previously, the company had sought additional yield generation means through investment and trading activities — providing a stable high yield with profits from crypto-backed loans alone was impossible. Virtually all other crypto lending platforms with earn programs engage in providing uncollateralized loans to institutions, trading, or both. This is a common and globally followed industry practice in this market.

Unfortunately, the crypto market, and therefore the assets accumulated for this purpose, had not recovered their value by April 24, 2023, when we received the Notice of restraint on disposition. This notice followed a lawsuit connected to the withdrawal limitations we had to impose in 2022 to help our business survive the bank run.

As a result, by that point, the company had accumulated losses, both unrealised PnL (around 74%) and realized PnL (around 26%), collectively accounting for the entire balance sheet deficit. "Unrealized" means that the assets have not been sold. These figures are verifiable through order and trade histories on the crypto exchanges used. Those histories reflect the full picture of the fund/cash flow and asset trading, making any allegations of fraud or other criminal offenses literally baseless. Solid proofs dispelling any possible reasonable doubts or similar ungrounded speculations will be provided to the trustee in bankruptcy.

Unlike many of its competitors, CoinLoan has never provided uncollateralized or under-collateralized loans or engaged in DeFi. Theoretically, in the absence of the above-mentioned court ruling, CoinLoan would have better chances of survival as it was still possible to attract additional investment. If the market had reversed later on and the investment climate improved, the gap between assets and liabilities would have decreased or even vanished.

Filing for bankruptcy is the simplest and quickest option for businesses that find themselves in similar situations in this rapidly changing industry. Instead, our team continued searching for alternatives in the interests of all clients, working hard to stay afloat and believing we could do it. Even now, we are considering restructuring options to propose at the creditors’ meeting and sources of capital for the most favorable outcome for our clients.

Where are the assets now?

As of this writing, the assets are being held by CoinLoan. In compliance with the request received from the trustee in bankruptcy, Mr. Pärn, we are preparing a procedure and instructions for their secure transfer under his control and disposal acting as an authorized legal representative on behalf of the company.

From our end, we are doing everything in our power to transfer the assets to the trustee as safely and smoothly as possible. Single-handed control over all assets entails additional security concerns. We are in constant contact with Mr. Pärn, and we are ready to share our blockchain knowledge and technical capabilities to facilitate this process.

Why do we have to send our claims to the trustee's Gmail address in the Estonian language and without a standard form?

All these requirements have been passed on from the trustee in bankruptcy. Our team has informed him of the users' concerns but has not received a response yet. It has also proposed using our company's email domain instead of Gmail. We are ready to help with streamlining the form filling process by creating an approved auto-fillable template in the Estonian language.

What’s next?

Following the court decision on June 14, 2023, the trustee in bankruptcy has taken over the decision making for the company. We are doing everything in our power to facilitate the return of users' assets to the highest extent possible. As mentioned above, we are still considering restructuring options and other alternatives in the interests of all our clients. Next week, a member of our in-house legal team is planning to hold an in-person meeting with Mr. Pärn in Tallin.

Will Alex Faliushin be present in court on June 19, 2023?

Alex Faliushin is in constant contact with our team and the trustee in bankruptcy. However, he is currently unable to enter Estonia due to paperwork issues – his residence permit has recently expired. He is discussing alternative ways of certifying the accuracy of the information concerning assets and debts as required by the Notice of declaration of bankruptcy through lawyers.

Update 22.06.2023: 19.06 is the date included in the official Notice of declaration of bankruptcy. However, this is a typo, and we are now waiting for the court to issue a correction order.

Alex Faliushin and CoinLoan Team

Without prejudice disclaimer. Nothing contained in this Blog (or published by CoinLoan otherwise) shall be interpreted and used against CoinLoan or be detrimental to any of its rights. All information publicly disclosed by CoinLoan herein or elsewhere shall be without prejudice to (i) any CoinLoan's rights or interests, whether addressed in this Blog or not, and (ii) any position that CoinLoan may take in legal or administrative proceedings.

Dear CoinLoaners,

You may consider this post long overdue, but the sheer number of unknowns we have dealt with made waiting until today a necessity. This legal impediment came with uncertainty and lack of guidelines about too many procedures, from classifying assets to planning further steps with outstanding clients’ loans. We have fully devoted ourselves to finding a way out, and this required extreme caution with public statements. Now, we are ready to inform you about the current state of affairs resulting from a Notice of restraint on disposition received on April 24, 2023.

Last year’s turmoil — the longest and harshest crypto winter — posed immense challenges for the crypto industry. However, we firmly believed CoinLoan would remain an exception, despite not having any government backing or access to the same market and legal frameworks as banks. The regulatory pressure, uncertainty, and the extreme bank run accompanying the domino-effect collapses of crypto businesses made limiting daily withdrawals inevitable. This measure allowed CoinLoan to stay generally operational with the most modest limitations for clients this situation allowed.

We strived to remain among the few crypto lending platforms still standing and tirelessly searched for ways to overcome the fallout. Our clients’ interests remained the top priority despite the headwinds.

I have directed all my efforts, time, and resources to keeping the company afloat and stabilizing its position in the market. I was confident that CoinLoan would withstand the ordeal without resorting to bankruptcy procedures. Filing for like other crypto companies  — throwing in the towel — would have been the easiest solution.

Our team’s commitment is what kept CoinLoan viable long after so many of our competitors had gone under. I have tremendous gratitude for the support I got from the CoinLoan family.

Understandably but unfortunately, the above-mentioned withdrawal limits did not resonate well with some of our clients, ultimately leading to the present lawsuit. The decision of the Estonian court deprived us of any opportunity to pay reasonable fees to all third-party providers (including salaries to employees and lawyer fees) without the consent of the interim trustee (we asked for it repeatedly, but all our reasonable and legit requests were either ignored or declined without any justification). This forced us into a situation where any resources for our defense were significantly limited. Reaching any settlement with the creditors on better terms than they would get as a result of the upcoming bankruptcy was impossible.

At the time, the company was in the process of altering its legal structure to meet dynamically changing regulations worldwide. Estonia had tightened regulations for crypto companies and practically "expelled" all crypto projects, leaving only a handful with a very simple business model.

Partly for this reason, our licenses for crypto activities in Estonia were voluntarily revoked. However, this transformation was unfortunately not completed, as the crypto-lending business model is the most complex in terms of regulation, and there is still almost no clear understanding anywhere. This court decision caught us off guard, leaving no alternatives.

Eventually, we were faced with only one option which the applicable law in Estonia requires — providing the interim trustee with information about our clients along with assets and liabilities (in particular our clients' claims). As of June 5, 2023, CoinLoan OU holds assets with a value of approximately 68 million euros, not including CLT. This amount is approximate and distributed among 9,826 clients. Our liabilities to clients are valued at roughly 206 million euros.

This amount is insufficient to fully cover all liabilities at once due to the current market conditions and unrealized loss on investment positions. Nevertheless, these assets belong to our clients, and we will facilitate their return to the extent possible by the applicable law. However, after the upcoming court hearing, we, most probably, will have no control over this, and the bankruptcy trustee will take over the decision making for the company.

What's next?

On June 7, 2023, at 11:00 a.m. local time, a court hearing will be held in Harju County Court. As a result of this session, our company will almost certainly be declared bankrupt. We will accept this outcome and facilitate its execution, as we have always done our best to comply with all applicable regulations and sought external professional advice when necessary.

Once this decision has been taken, we urge all clients to inform the appointed interim trustee of their demands in order to be included in the registry and receive a share of the assets. We will keep all accounts on the platform functional, so everyone can receive a confirmation of their current balances. Afterward, we will do everything in our power to ensure CoinLoaners receive as much of their assets as possible and as fast as possible.

We have always maintained open communication. CoinLoan’s Telegram chat was launched together with its platform, and we are going to keep it. Therefore, besides the official support, I invite all users to join the Telegram community to connect to other CoinLoaners and our team, which is always ready to address inquiries and provide the necessary assistance. As CoinLoan CEO, I try to devote my attention to every message.

The current situation affects all users. You have placed your trust in CoinLoan, and I apologize for this unfortunate series of events and its impact on your assets. We are preparing a more detailed post outlining the situation, which will be available soon. Further relevant updates and instructions will be published in a timely manner.

Alex Faliushin

CoinLoan CEO

Without prejudice disclaimer. Nothing contained in this Blog (or published by CoinLoan otherwise) shall be interpreted and used against CoinLoan or be detrimental to any of its rights. All information publicly disclosed by CoinLoan herein or elsewhere shall be without prejudice to (i) any CoinLoan's rights or interests whether addressed in this Blog or not, and (ii) any position that CoinLoan may take in legal or administrative proceedings.

A Notice of restraint on disposition received yesterday, April 24, 2023, obliges CoinLoan to halt all operations for its users, including withdrawals. This action is unexpected and has immediate effect. As a result, we have no choice but to comply with the said requirements. We are doing everything in our power to resolve this situation as quickly as possible.

Our legal entity in Estonia (CoinLoan OÜ) is part of the CoinLoan group, and the interim trustee’s approval is now mandatory for any operations involving any interaction of CoinLoan OÜ within the group that may entail any obligations for CoinLoan OÜ. Receiving such approval may take several business days. We will share more information as it becomes available.

Our legal team has provided sufficient arguments to prove CoinLoan’s ability to fulfill its obligations. The appointment of the interim trustee seems to be the easiest way for the court to find a solution by letting an independent third party verify the financial situation of the company. We are going to file an appeal, but we must also obey the existing court ruling.

Pausing all activities on the platform is a difficult decision, and we have made it with a heavy heart. We understand that this news has an impact on all CoinLoaners, whose interests have always been our priority. We will work diligently to meet our obligations, taking all the necessary steps to protect and preserve users’ assets.

Without prejudice disclaimer. Nothing contained in this Blog (or published by CoinLoan otherwise) shall be interpreted and used against CoinLoan or be detrimental to any of its rights. All information publicly disclosed by CoinLoan herein or elsewhere shall be without prejudice to (i) any CoinLoan's rights or interests whether addressed in this Blog or not, and (ii) any position that CoinLoan may take in legal or administrative proceedings.

The recently deployed Shapella hard fork was the last significant upgrade to make Ethereum a truly PoS blockchain. In the network's history, which spans almost a decade, many upgrades were deployed to set it up.

Creating Ethereum Foundation

In June 2014, the group of developers behind Ethereum established the Ethereum Foundation in a Swiss jurisdiction. The plan was to start a crowdfunding campaign and raise funds for the future development of the network.

The crowdsale lasted for 42 days. 60 million Ether were generated to be later sold to the public, during the first weeks of which investors could get 2,000 Ether per bitcoin. Later, that number was slashed to 1,399 ETH per BTC.

As a result, $18 million worth of BTC kickstarted the development of the 2nd largest cryptocurrency in the world.

What is a fork?

Forks are changes that are implemented in a blockchain protocol, an upgrade to a network which can feature a minor update or a significant change — for example, transitioning from one consensus mechanism to another. Forks can be initiated by community members as well as developers.

Hard forks vs. soft forks

Hard forks make previous versions of the chain obsolete. Therefore, every validator on the network should update to its latest version, ultimately forming a new chain. Members of the old version get new tokens in the new chain since they share the same history.

Soft forks are not as radical as hard forks and have backward compatibility. The protocol's development team often uses them to program new features into the codebase.

Ethereum Improvement Proposals (EIPs)

An Ethereum Improvement Proposal is a formal document that describes new functionality or process on the Ethereum blockchain. Given the complexity of a well-written EIP, generally, they are created by application developers. The guidelines for writing an EIP are outlined in EIP-1.

A fork of the chain can include several EIPs.

Frontier

The first hard fork of the Ethereum blockchain containing the network's genesis block, Frontier, was deployed on July 30, 2015.

The first block contained 8,893 transactions of all the users participating in the crowdsale. Over 72 million Ether were pre-mined for the launch, 12 million of which were allocated to the blockchain's development fund.

The Ethereum Virtual Machine was introduced on Frontier.

Homestead

The Homestead upgrade executed on May 14, 2016, was the first planned hard fork. The upgrade introduced new Solidity code to enhance smart contract functionality and eliminated a centralization point on the network known as "canary contracts."

DAO hack

The DAO (Decentralized Autonomous Organization) was launched in 2016. It aimed to create a new decentralized business model for the organization of both commercial and nongovernmental enterprises. It was deployed on the Ethereum blockchain and did not have a conventional management structure or board of directors.

During its funding period, which lasted 28 days, The DAO raised around $150 million worth of Ether from more than 11,000 people, which made it the most successful crowdfunding in history.

As with any agreement on Ethereum, the rules of The DAO were written into a smart contract, available to the public eye. Shortly after the launch, malicious actors found a vulnerability in a piece of the program guarding the $150 million pool.

The incident

In June 2016, a reentrancy bug led to a heist of 3.6 million Ether. The hackers attacking the smart contract created a "child DAO" to which the funds were transferred. It inherited all the rules and vulnerabilities from its older sibling. Since the original DAO had a funding period of 28 days, no one could transfer the funds from it until that period had passed, leaving the stolen funds frozen for 28 days.

EIP-779 and Ethereum Classic

Network users put forward a controversial EIP-779 to implement a change in the lockup contract, after which the participants could withdraw their funds from the DAO pool and remain unaffected by the hack. The majority of the mining power agreed with the proposal and voted to do a hard fork. Those who wanted to stay on the old chain shifted to Ethereum Classic protocol. It is mainly supported by the Ethereum community.

In 2017, Ethereum entered a long-running phase to become a Proof of Stake protocol.

Metropolis stage

Metropolis is the Ethereum blockchain's planned stage to prepare the network for the switch from the Proof of Work to the Proof of Stake consensus method. Byzantium and Constantinople served as the initial stages of the Metropolis implementation.

Byzantium

The Byzantium hard fork went live in October 2017. The EIPs included in the upgrade were set to disincentivize mining on the blockchain by slashing the reward for a mined block from 5 Ether to 3.

Constantinople

The fork was deployed in two stages: Petersburg and Istanbul. The main proposal included in Petersburg — EIP 1234 — adjusted block rewards accrued by miners. After the hard fork, they would get 2 ETH instead of 3 per mined block.

Istanbul, deployed on December 8, 2019, was set to optimize gas costs with the EVM and create the possibility to deploy Layer 2 scaling solutions, such as zero-knowledge rollups using zk-SNARKS and STARKS.

To learn more about zero-knowledge systems, check out our in-depth guide.

Beacon Chain

The Beacon Chain was designed to ensure that the PoS consensus logic is reliable enough to be used on the Ethereum mainnet. This was why it ran in conjunction with the original PoW chain. To enable PoS on the mainnet, the Beacon Chain received the transactions from the original chain, bundled them into blocks, and grouped them into a blockchain that worked on PoS.

Role of the Beacon Chain in the Ethereum ecosystem. Source: Consensys

Beacon Chain also introduced staking. Network participants could now stake their Ether to validate transactions and get rewards. The minimum staking amount of 32 ETH was needed to become a validator on the new chain.

Although staking Ether was a big step toward a new consensus mechanism, the feature had some limitations. Participants that staked their holdings couldn't get their staking rewards or withdraw the staked Ether.

The old consensus mechanism, mining, and block propagation were turned off and handed out to the Beacon Chain in an event called The Merge.

The Merge

The highly anticipated upgrade to a more sustainable and eco-friendly consensus mechanism was deployed on September 15, 2022. The transition was expected to lower Ethereum's energy consumption by 99.95%, reduce transaction confirmation times, and make the network more decentralized due to lowered costs of becoming a node operator.

Simply put, The Merge was when these two systems intertwined, and Proof of Work was permanently replaced by Proof of Stake.

Ethereum's Shanghai upgrade

Since 2017, Ethereum developers have significantly upgraded the network to fully integrate PoS into the blockchain. The final step in that process was to enable the withdrawal of staking rewards and validator-staked ETH.

Whenever a new feature is implemented into the Ethereum protocol, it is enrolled both in the execution and consensus layers. The execution layer handles all the computations, while the consensus layer ensures that every participant on the network follows the rules.

On April 14, 2023, upgrades called Shanghai and Capella (Shapella) were deployed, each of them representing changes in the execution and consensus layers, respectively. The upgrades also introduced the ability to add withdrawal credentials for those who had not done it during the initial deposit.

On the first day of Shapella, around 180,000 Ether were withdrawn, 95% of which were staking rewards.

Final thoughts

With Ethereum fully transforming to PoS, the development team can finally focus on Layer 1 scaling solutions. Sharding is expected to elevate the blockchain's TPS to 10,000, compared to the current 29. Thanks to Shapella, liquid staking platforms will skyrocket in popularity and attract more users to the network, leaving scalability the #1 problem of the Ethereum blockchain.

Price dynamics

BTC price

Bitcoin started the week by dashing from roughly $28,000 to nearly $29,250. Continuing the ascent, it leveled off close to $30,200 the next day. Wednesday, April 12, brought a price of almost $30,300, and the surge climaxed at $30,979.32 on Friday, April 14. During the weekend, the coin remained just below $30,500. Monday trading (April 17) pushed it slightly below $29,400.

According to K33 Research analyst Vetle Lunde, the pattern of the latest rally is nothing new. Speaking to CoinDesk TV, he noted, "The current drawdown and recovery stage is remarkably similar to that in 2019, both in duration and price movement." The end of 2022, marked by forced selling and caution, combined underexposure with the temptation to short BTC. Those factors created a dynamic "where Bitcoin feeds on your short squeezes and moves higher."

The Crypto Fear and Greed Index dipped slightly on Thursday, April 13, and returned to last week's greed score (68). The rally appears stalled at press time, with BTC back below $30,000. However, Bitbank analyst Yuya Hasegawa has suggested "a little bit of correction should be expected, and it will ultimately be healthy for Bitcoin's upward trend to continue."

At press time, BTC is trading at $29,655.85, with a 24-hour loss of -1.0% and no 7-day change.

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ETH price

Compared to Bitcoin, Ether's first day was muted. Starting at $1,850, it reached above $1,920 on Tuesday, April 11, rolled back, and rebounded the next day. It then surged on Thursday, April 13, breaching $2,000 in the late hours. On Friday, April 14, ETH hit a 7-day high of $2,123 before trading slightly lower through the weekend. Following an uptick on Monday, April 17, its price tumbled below $2,100.

The completion of the Shapella upgrade has sent ETH to the highest highs since August 2022. Over the first four days, the net inflow to exchanges totaled 179,500 ETH worth around $375 million, with deposits exceeding withdrawals. While transfers to exchanges typically imply an intention to sell, experts currently see no evidence of en masse exits.

Shortly before the upgrade, Ethereum co-founder Vitalik Buterin said solving the network's scaling issues was "the immediate next focus." Otherwise, users may face ballooning gas costs when the next bull run spurs on-chain activity. "People are going to be stuck paying $500 transaction fees," he warned.

At the time of writing, ETH is worth $2,098.55, with no 24-hour change and a 7-day rise of +9.9%.

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XRP price

The Ripple token jumped twice, with the first peak of $0.523961 on Tuesday, April 11, and a 7-day high of $0.536166 on Friday, April 14. The trough between them pulled XRP below its initial price of $0.505 on Wednesday, April 12. The weekend was relatively volatile, with seesawing between $0.526 and $0.517. On Monday, April 17, XRP sank again, hitting $0.508 late in the evening.

On April 13, Ripple publicly launched Ripple Liquidity Hub, an enterprise API product designed to help institutions manage crypto liquidity. The official blog post states that the company is shifting to a multi-asset reality encompassing fiat, crypto, CBDCs, and NFTs. However, XRP is not part of that bundle yet. According to Chief Legal Officer Stuart Alderoty, it will be supported once the liquidity and customer demand in the US are sufficient.

It also came to light that the SEC, which is currently suing Ripple, has lost five of its last six cases in the Supreme Court. Furthermore, on April 16, Ripple attorney John E. Deaton shared a video of a conversation between US investor Tim Draper and Gary Gensler in 2018. In it, Draper "tells Gensler bankers are 'panicking right now' about crypto's disruptive potential, and predicts that incumbents will sue, exert media pressure and leverage government regulators to slow its progress."

As of this writing, XRP is trading at $0.513659, with a 24-hour loss of -0.2% and a 7-day shift of -0.9%.

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Cryptocurrency news

With BTC at $30K, analysts weigh in on the next crypto boom

Last week, Bitcoin traded confidently above $30,000 after retracing the path from $20,000 in the past month. However, the state of the market is a far cry from what it was before the fall of Three Arrows Capital, and some experts remain cautious.

Bloomberg analysts admit that we are yet to see if "the mood has improved compared with last year's apocalyptic vibe." Oliver Linch, CEO of Bittrex Global, has warned against pretending "that the last ten months never happened." On the upside, "there is certainly a feeling that maybe this signals that a line can be drawn under those scandals, and we can get back to assessing – and valuing – crypto without all the noise from the rumors and wrongdoing," he said.

Positive macro signals

Investors have reasons to hope that the Fed will refrain from aggressive monetary tightening. According to Tim Frost, CEO of Yield App, this long-awaited shift "is expected to create a more stable, and hopefully predictable environment."

The banking turmoil that brought down several crypto-friendly entities in March – Silvergate Capital Corp., Signature Bank, and Silicon Valley Bank – raised such expectations. The CPI report published on Wednesday, April 12, revealed an increased impact of the previous hikes. The actual rise was smaller than expected – 0.1% in March and 5% year-over-year. Meanwhile, the cost of energy and food stayed flat.

Jeffrey Roach, LPL Financial's chief US economist, is optimistic. "As the economy slows, consumer prices will decelerate further and should bring inflation closer to the Fed's long-run target of 2%," he explained. Roach expects a positive reaction from the markets as investors become more confident that the May 3 FOMC meeting "may be the last meeting when the Committee raises the fed funds target rate." At press time, the CME Fedwatch tool shows an 85% probability of a 0.25 increase.

Lingering concerns

Matteo Dante Perruccio, President International at Wave Digital Assets, supposes that "a lot of the industry is still in wait-and-see mode." At the same time, there has been a "flight to quality, and the beneficiaries are those companies that weren't hit by the crypto winter."

While TradFi crises are often bullish for crypto, the implications this time are not entirely positive. On the one hand, bankruptcies revive the original BTC narrative about the pitfalls of centralization. On the other hand, as Bloomberg notes, the loss of critical connections to the US financial system makes the industry's future vague.

The current investments in DeFi pale in comparison with the all-time high. DeFiLlama estimates that the total value locked (LTV) is just $53.2 billion – a 25% increase since early January but less than a third of the whopping $180 billion in December 2021.

Hiring has not recovered either, with talent supply surpassing demand. Concordium co-founder and chairman Lars Seier Christensen interprets this as a sign of maturing and "realizing that the money tree available a couple of years ago has withered a bit." Recently, his company has received several hundred applications for a handful of job openings.

Finally, there is a deluge of regulatory scrutiny. Coinbase Global Inc. has received a Wells notice from the SEC — essentially, a threat to sue it over some of its products. Meanwhile, Terraform co-founder Do Kwon is facing criminal charges for his role in the Terra-Luna collapse. Binance and its CEO Changpeng Zhao are being sued for multiple alleged violations, and FTX's Sam Bankman-Fried is still awaiting trial.

ETH eclipses BTC following Shapella

On Thursday, April 13, the price of Ether soared past $2,000 for the first time since August 2022. That rally started after it was confirmed that the Shanghai, or Shapella, update had gone smoothly the day before.

Contrary to expectations, no rapid outflows ensued, and the first four days brought a nearly 10% increase. As a result, on April 13, ETH dominance jumped to 19.87% – a one-month high – knocking BTC's market cap share off its nearly two-year record of 49.06%.

At press time, ETH's year-to-date gains stand at 75.66% against BTC's 79.93%. Both coins have a long way to go to recover from last year's turmoil — the prices are less than half of what they were before the FTX fiasco.

Withdrawals vs. deposits

Shapella has enabled withdrawals for investors who had staked ETH for rewards since December 2020. They can now queue up to retrieve their coins. However, according to Flipside Crypto, it was rewards, not stakes, that made up 96% of the initial outgoing volume.

Coin Metrics expected withdrawals of around 1.2 million ETH over five days. While impressive on its own, this number represents merely 6% of the staked total – approximately $36.7 billion ETH. On Monday, April 17, Cointelegraph reported that 1.03 million ETH had been withdrawn, with a peak outflow of 392,800 ETH on Saturday, April 15.

Positive expectations

New deposits outpaced the outflows as bulls defied negative projections. As noted by Grayscale Research analyst Matt Maximo, this dynamic boosts the "buy pressure to offset the withdrawn ETH."

His observation matches the prediction made by Lachlan Finney, chief executive at Labrys. "Because Shapella is a massive de-risking event, over the medium to long term more, not less, ETH will be staked. We anticipate that in the not-too-distant future, we will reach a record high of Ether being staked," he told Cointelegraph.

As per Rated Network Explorer's data, Kraken dominated the initial queue. The exchange is discontinuing staking services in the US as part of its settlement with the US Securities and Exchange Commission (SEC). However, despite the "looming" un-staking pressure from other businesses like Celsius, the "overall liquidity situation is favorable for crypto assets," according to "Crypto Is Macro Now" author Noelle Acheson.

Progress made in cryptography has always been integral to blockchain tech. Zero-knowledge proofs emerged into cryptocurrencies almost ten years ago, improving the anonymity and scalability of distributed ledger technology.

Now, zero-knowledge technology has taken on the World Computer — the mighty EVM.

Ethereum scaling problems

Right now, Ethereum stands at around 30 TPS. To compare, blockchains like EOS can process up to 4000 transactions per second. Traditional payment processing systems like Visa have a throughput of 40,000 TPS. With transaction fees increasing on the Ethereum network, scaling solutions come to the rescue.

There are two types of scaling solutions for the Ethereum blockchain: on-chain and off-chain. On-chain scaling solutions like sharding are yet to be enrolled in the network, and given its complexity, most of the attention has been shifted to off-chain scaling.

Existing solutions

One of the reasons why layer-2 solutions have been successful is the absence of the necessity to apply changes to the existing Ethereum infrastructure. L2 solutions include optimistic rollups, zero-knowledge rollups, and state channels.

Optimistic rollups

Optimistic rollups abide by the L1 Ethereum rules and are controlled by smart contracts from the mainnet. All the computation is done on an off-chain Ethereum virtual machine, and the results, including all transaction parameters, are published to the mainnet.

Optimistic rollups assume that the data is valid by default. If a fraudulent transaction is published to the mainnet, a dispute process is started to verify fraud proofs from other network participants.

This solution has two obvious problems: a dispute process can take up a lot of time, affecting transaction finality, and since all of the data must be submitted to the mainnet, high gas costs are at play.

Zk-rollups

Zero-knowledge rollup (zk-rollup) is a layer-2 solution that takes computations and states from the blockchain into an off-chain network and publishes the results to the mainnet.

Compared to optimistic rollups, with ZK, only the last state change is published to the blockchain. The proof of zero-knowledge guarantees the validity of each transaction and removes the necessity to verify them on-chain, resolving delayed transaction finality and high gas costs.

Zk-rollups are widely used in various Ethereum scaling implementations, zkSync, Immutable X, and Aztec Network, to name a few.

zkEVM

Thanks to the research done in the past years towards zero-knowledge cryptography, it is now possible to implement a zkEVM. This Ethereum virtual machine executes smart contracts compatible with zero-knowledge-proof computation.

The architecture of zkEVM

Ethereum virtual machine wasn't designed with zero-knowledge-proof computation in mind. Here are the pillars that make it possible.

Execution environment

In order to support the use of innovative contracts in zkEVMs, the execution environment plays an important role. Therefore, the zkEVM implementation environment is similar to that of EVM, as it must have an established state and existing transactions to create a new one.

Proving circuit

This circuit produces zero-knowledge proofs in the zkEVM, which is essential to determine whether a transaction has validity within an execution environment. To create ZKPs, pre, and post-state information and transactions are used in the proof generation process. In conclusion, verifiable proof that the state transition in question is valid could be obtained from the prover.

Verifier contract

The verifier contract is an additional key feature of the zkEVM architecture. It is responsible for verifying the validity of the evidence provided by the zk-rollups. A verifier contract also requires input and output of the zk-rollup for transaction verification. Therefore, in addition to verifying the correctness of the computation of the outputs from the relevant inputs, the verifier shall perform the calculation of the proof.

What types of zkEVMs exist?

Currently, there are four types of zkEVM in existence.

Type 1: Fully Ethereum equivalent

ZkEVM type 1s are expected to be fully equivalent to Ethereum without changing their state or transaction tree, the hash code, and all other logic that is part of its consensus. As a result, type 1 zkEVMs are fully compatible with all Ethereum-native applications but require more prover time, as no unique reworking is done to make proof generation faster.

Type 2: Fully EVM equivalent

Type 2 zkEVMs have slight modifications that make developing and speeding up proof generation easier. Some applications may not be compatible with this type of deployment. However, slower proving times will still be experienced by type 2 zkEVMs.

Type 3: Not entirely EVM equivalent

Some EVM features, like precompiles, VM memory, stack, and how smart contract code is treated, are modified by type 3 zkEVMs for easier application development and proof generation. Most Ethereum applications can be used in this environment, but some may need to be changed.

Type 4: High-level language equivalent

Type 4 systems take code written in a high-level language such as Solidity or Vyper and compile that to a language that is designed to be friendly with zero-knowledge proofs, allowing much faster proof generation and lower costs.

Let's take a look at existing implementations of the described virtual machines.

Polygon zkEVM

Polygon's zkEVM is a zero-knowledge virtual machine that supports EVM compatibility. To verify correct program execution, "micro opcodes" compiled from EVM bytecode are executed on uVM, a virtual machine that uses SNARK and STARK proofs.

STARK (Scalable Transparent ARgument of Knowledge) proofs are faster to generate, but SNARK (Succinct Non-Interactive Argument of Knowledge) proofs are smaller and cheaper to verify on Ethereum.

Check out our in-depth guide to zero-knowledge systems to know more about STARK and SNARK proofs.

Scroll

The Scroll team has designed circuits with zero-knowledge for each opcode of the EVM, which makes it possible for developers to deploy Ethereum native smart contracts on Scroll without having to modify the underlying EVM bytecode. In addition, the "cryptographic accumulator" is used by Scroll zkEVM for checking storage accuracy.

zkSYNC 2.0 zkEVM

zkSync's zkEVM is a type 4 solution. It's an EVM-compatible zk-rollup developed by Matter Labs and powered by its own zkEVM. To achieve compatibility with Ethereum, smart contracts written on Solidity are compiled to Yul, an intermediate language capable of generating byte codes for multiple virtual machines. Then it is recompiled to a custom, circuit-compatible bytecode set specially designed for zkSync's zkEVM.

Conclusion

zkEVM is undoubtedly one of the most significant achievements that will lead Ethereum and crypto to an even wider audience. Although the race for the best zkEVM solution is just starting, it will be interesting to see how L2 solutions intertwine with fully native, L1 applications to scale the Ethereum mainnet.

Price dynamics

BTC price

After a 7-day low of $27,629.01 on Tuesday, April 4, Bitcoin topped out at $28,616.17 the following day. Next came a return below $28,000, a volatile Thursday with a lower low, and a flat Friday. BTC then see-sawed between just under $28,000 and $28,130 until late Sunday, April 9. The next day, its price finally breached $29,000, jumping as high as $29,249.09.

While BTC was stuck at around $28,000, the Crypto Fear and Greed Index remained locked in the greed zone. Investors were mulling over several bearish signals, from disappointing US non-farm payroll data to lower-than-expected Services PMI (Purchasing Managers' Index). The revised jobless figures left most investors unmoved, despite being favorable for the market.

At press time, BTC has broken above $30,000 for the first time since last June. According to Richard Mico, Banxa's US CEO and Chief Legal Officer, "the market is pricing a slowdown in growth, and in turn, a loosening of monetary policy by the Federal Reserve over the course of 2023." Crypto investors may expect a significant liquidity influx, partly as the narrative around BTC is shifting: "BTC is now properly starting to be perceived as a risk-off asset," Mico says.

At press time, BTC is trading at $30,079.00, with a 24-hour gain of +6.2% and a 7-day rise of +8.1%.

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ETH price

Ether outperformed Bitcoin ahead of the Shapella upgrade. It rose steadily from below $1,800, reaching a 7-day high of $1,921.33 on Wednesday, April 5. After a slight dip, the price fell below $1,880 the next day and past $1,860 on Friday, April 7. The first day of the weekend brought a short-lived uptick. Then, in tandem with BTC, ETH soared on Monday, April 10, almost touching $1,900.

Traders' sentiment appeared contemplative, while whale enthusiasm waned and the exchange supply stagnated. As the Shapella upgrade looms, the share of ETH transactions worth $100,000 and above has shrunk. Based on Santiment's data, between March 11 to April 10, whale transactions sank to 2,346 — an 84% decline.

Combined with flat exchange balances, the plunge reflects doubts about ETH's short-term future. Following the previous price hike in March, investors moved their coins out of exchanges into cold wallets to position themselves for future profits. Stagnant supply may impede explosive price action in the wake of Shapella, as fulfilling buy orders with reduced volumes creates upward pressure.

At the time of writing, ETH is worth $1,921.22, with a 24-hour increase of +3.2% and a 7-day rise of +6.1%.

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XRP price

Ripple lost ground at the beginning of the week, slipping from over $0.522. It dove to a 7-day low of $0.491427 on Tuesday, April 4, bounced back the next day, and swiftly declined, hitting $0.496 on Thursday, April 6. After starting the weekend at around $0.514, XRP gradually descended until a boost on Monday, April 10. After trading near $0.508, XRP reached $0.513581 close to midnight.

On April 8, XRP jumped after Ripple was reported to be the sole "platinum partner" at the upcoming Digital Monetary Institute (DSI) Symposium. This annual two-day event, scheduled to start on May 10, is devoted to the theory and practice behind CBDCs and financial markets. Its previous participants include 126 central banks, US Treasury, and experts from across the sector, but no crypto firm has secured a premium status before.

Last week also brought a new twist in the SEC vs. Ripple case. According to a statement by the regulator's expert, up to 90% of XRP fluctuations since mid-2018 may be explained by the movements of BTC and ETH. Lawyer Jeremy Hogan expects a "split" outcome based on this assumption. If the judge rules that XRP sales constituted unregistered security sales until mid-2018, the blockchain firm may be fined.

As of this writing, XRP is trading at $0.523514, with 24-hour growth of +3.6% and a 7-day gain of +5.3%.

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Cryptocurrency news

ETH rises as investors anticipate Shapella

Ether leapt mid-week as the final countdown to the Shapella (Shanghai + Capella) upgrade started. On Wednesday, April 5, the coin reached $1,921.33, the highest price in nine months. According to MarketWatch, it is now 60.62% up year-to-date, behind BTC's 81.35%.

Since 2020, investors have been able to stake ETH to earn an income as transaction validators. Starting this Wednesday, April 12, they will be able to withdraw those locked-up coins. Previously, they could only exchange them for other tokens via CeFi or DeFi platforms and protocols like Lido.

The rally resembled the bouts of enthusiasm ahead of the previous technical revamps. For example, in September 2022, Ether sprang up shortly before the network transitioned to Proof of Stake, a more sustainable consensus mechanism. With the Merge upgrade, validators replaced miners, who had expended computing power to solve complex puzzles and mint ETH.

Ethereum Foundation researcher Danny Ryan has noted that ETH is becoming a "productive asset… not something you might just speculate on, but it's something that can earn returns." Furthermore, "it's probably the lowest-risk return inside of the Ethereum ecosystem," considering smart contract vulnerabilities and counterparty risk in DeFi.

Possible impact on ETH price

The total staked amount — over 18 million ETH worth roughly $33.7 billion — constitutes 15% of the total supply. To prevent too many simultaneous withdrawals, stakers will join queues. Yet while some experts predict a boost in Ether's long-term profitability, others worry about short-term flooding.

K33 Research estimates that $2.4 billion worth of ETH could be released into the open market. The risk of technical glitches remains, and some nodes may have lost the keys to their staked holdings.

However, if the withdrawals go smoothly, more investors are likely to stake ETH, leading to an influx of capital. Bloomberg analysts expect the demand for withdrawals to initially eclipse new deposits, with staking becoming more appealing afterward.

The Block has reported an upswing in the ratio between the open interest of ETH put and call options. The highest level since May is a possible sign of a bearish bet accumulation ahead of the upgrade.

Liquid-staking tokens

Around 70% of all staked ETH is locked in DeFi protocols like Lido, which may enable withdrawals in May. Lido alone holds roughly a third of all staked ETH.

The remaining 30%, according to research firm Bernstein, belongs to "original believers," who are unlikely to exit their positions at current prices. Meanwhile, the volatility of liquid-staking tokens could rise.

Economic blues keeps BTC stuck at $28,000 before a surge

Despite the bank fears subsiding, Bitcoin failed to breach $30,000 last week. According to Bloomberg, the $29,000-to-$30,000 area, where it had found support before, was an upside barrier.

In Q1 of 2023, BTC's reputation as an inflation hedge and TradFi competitor helped it outperform other major assets. However, the liquidity and volumes in the crypto market stayed below the levels that preceded last year's black swans. Fundamentally, this market is yet to recover, and there is no "narrative for price action," according to Aya Kantorovich, FalconX's former head of institutional coverage.

"You're not necessarily seeing net new users," she told Bloomberg. Although the banking turmoil has energized BTC bulls, institutions flocked to other "safer" assets such as ETFs or mutual funds. "The immediate reactions will typically be either retail or already engaged crypto traders or institutions."

Bear market blues

The week delivered several bearish signals. First, the March non-farm payroll data stoked recession fears. Not only is the increase of 236,000 jobs in March well below the 239,000 projected by economists polled by Reuters. It is also the lowest monthly increase since December 2020, combined with slower pay growth.

These changes stem from weakening consumer demand and more expensive borrowing. Furthermore, the International Monetary Fund expects the global GDP to grow by about 3% over the next five years, the slowest pace in two decades.

Finally, the Services Purchasing Managers' Index (PMI) also fell short of expectations. According to the Institute for Supply Management, it reached 51.2% in March instead of the projected 54.5%. A measure of market conditions, a falling PMI suggests an economic contraction.

What lies ahead

Kadan Stadelmann, CTO of blockchain infrastructure development firm Komodo, believes "the market is undecided," while the risk-off sentiment has been positive for BTC. "The bank runs we have seen in recent months build the case for Bitcoin. They are why Bitcoin was built," he explains.

Stadelmann suggests BTC's rise above $30,000 this week may be short-lived. Subsequently, deeper recession fears may trigger panic selling followed by a quick rebound.

Seasonality may also come into play. Typically, BTC has performed well in April, with an average monthly gain of 15.63% over the past five years. As per Bespoke Investment Group, April is the second-best month behind October.

Matt Maley, Miller Tabak + Co.'s chief market strategist, suggests BTC is a victim of its own success. Recent dramatic swings in both directions have been followed by range-bound trading. "Once it makes that move, investors get nervous about the move, and then the crypto falls into a sideways range for a while," Maley says.

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Price dynamics

BTC price

Bitcoin traded shy of $28,000 on Monday, March 27, before sinking to $26,945.15. The next day, the price dove deeper, bottoming out at $26,777.57. BTC reached above $28,570 the next day, hit a 7-day high of $29,021.35 on Thursday, March 30, and dipped again. Subsequently, the price wobbled slightly around $28,500 through the weekend and slid to $28,100 on Monday, April 3.

The Crypto Fear and Greed Index showed a slight improvement in investors' appetite within the greed zone. The coin has gained over 26% over the past month, clinging to around $28,000 since mid-March. According to trader and author Glenn Goodman, the Fed's "injection of new money into the economy" makes people "brave enough now with this new liquidity to get back into what they consider big, profitable companies […] and likewise, in the crypto market, they're going for what are considered the safer cryptos, which are Bitcoin and Ethereum."

On Monday, April 3, BTC and other cryptocurrencies dipped on the news of a production cut by OPEC+ amid rising oil prices. According to Barron's, the move stoked fears of stronger inflationary pressures that may prompt aggressive measures from the Fed. That impact highlighted BTC's susceptibility to macroeconomic factors and its correlation with the stock market and the broader risk sentiment.

At press time, BTC is trading at $27,848.06, with a 24-hour loss of +0.4% and a 7-day change of +2.5%.

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ETH price

Ether initially climbed to $1,780 and rolled back below $1,710. It rose above $1,780 on Tuesday, March 28, and touched $1,825 the next day before diving to $1,767.27 on Thursday, March 30. Friday trading pushed the coin above $1,820, where it spent most of the weekend. On Monday, April 3, ETH rebounded from around $1,770, reaching $1,833.99 in the late hours.

ETH wrapped up the first quarter of 2023 with a gain of 55%. Since the low of nearly $880 in June 2022, its price has more than doubled despite a spate of adverse events, including interest rate hikes and regulatory pressure in the US. Furthermore, according to Santiment, ETH whales have continued accumulating the coins.

Ethereum's Shapella – Shanghai and Capella – upgrade is now slated for April 12. It will enable withdrawals from Ethereum 2.0 staking contracts, which now hold over 18 million coins. The mechanics of the upgrade should prevent gas price spikes, as it imposes a per-block limitation on withdrawals, and divides the selling pressure into three phases. It should peak in the first three days after the upgrade, based on Arcana Research's estimates.

At the time of writing, ETH is worth $1,806.45, with a 24-hour gain of +1.5% and 7-day growth of +5.1%.

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XRP price

The Ripple token price rocketed from under $0.450, rising smoothly through the first three days of the week. Its growth culminated in a 7-day high of $0.57664 on Wednesday, March 29. It then slid to roughly $0.540 and barely moved until Saturday, April 1, when it dipped to $0.503. On Sunday, April 2, XRP rose again, briefly reaching above $0.527. Monday, April 3, did not bring significant change.

Despite the absence of new developments in the SEC vs. Ripple case, investor hopes of a favorable verdict brought dip buyers back. As a result, XRP led altcoins in inflows, with $800,000 directed into XRP-focused investment products over the period. This surge put the token ahead of all cryptos, with the exception of BTC.

Meanwhile, Ripple's Chief Legal Officer, Stewart Alderoty, warned that "words have consequences, even for unelected senior bureaucrats." Commenting on the SEC's stance, he tweeted, "Suddenly, now saying that you haven't prejudged every crypto (with the exception of BTC) as a security after being called out for publicly prejudging every crypto as a security doesn't unring the bell."

As of this writing, XRP is trading at $0.497016, with a 24-hour loss of -2.8% and a 7-day change of +3.4%.

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Cryptocurrency news

Cryptocurrencies move up despite Binance crackdown

Last week, investors were spooked by legal action against Binance, its CEO Changpeng "CZ" Zhao, and Chief Compliance Officer Samuel Lim. The Commodity Futures Trading Commission (CFTC) filed that lawsuit with a Chicago federal court on Monday, March 27. Yet the leading coins wobbled only briefly.

The market has since recovered. Late on Monday, April 3, the pioneering coin was 1.1% up over the past seven days, while ETH had gained 2%. The same dynamics dominated the top 30, save for Binance's BNB, which was 4.7% down. The total market cap had risen from $1.15 trillion to $1.22 trillion, according to CoinGecko.

CFTC vs. Binance

The CFTC, the leading US derivatives regulator, has accused Binance of unauthorized derivatives trading. According to the lawsuit, Binance committed a crime by offering futures, swaps, and options on major cryptocurrencies to US clients without registering with the agency.

The document reads, "Binance has taken a calculated, phased approach to increase its United States presence despite publicly stating its purported intent to 'block' or 'restrict' customers located in the United States from accessing its platform."

Other accusations include failing to use adequate Anti Money Laundering (AML) and Know Your Customer (KYC) measures. According to the CFTC, Binance has knowingly eluded or helped customers elude US regulators and even traded against its own clientele.

The world's largest crypto exchange has responded by calling the lawsuit "unexpected and disappointing as we have been working collaboratively with the CFTC for more than two years." Its spokesman added, "Nevertheless, we intend to continue to collaborate with regulators in the US and around the world. The best path forward is to protect our users and to collaborate with regulators to develop a clear, thoughtful regulatory regime."

Zhao tweeted "4," implying that Binance had been disadvantaged. Previously, he used that number in reference to "FUD, fake news, attacks, etc."

Fourth straight month of rising crypto investments

In March, investors continued pouring capital into digital-asset products. As per CryptoCompare estimates, AUM (assets under management) rose by almost 11% compared to February and 60% compared to November, totaling $13.4 billion. That change marked the fourth straight month of growth.

Bitcoin accounted for the largest share of investments – in mid-March, its dominance hit 72%, the highest level in nine months. Bitcoin-based and Ether-based investments rose by 14% and 6.25%, respectively. Meanwhile, products in the "other" category saw a 13.3% decrease in assets.

US government sells $215M worth of seized Silk Road BTC

According to a court filing made public on March 31, the US government sold over $215 million worth of BTC last month. Those funds had been seized from the Silk Road darknet marketplace. The document says 41,490 BTC ($1.1 billion) are left to dump.

In November 2021, US law enforcement seized $3.36 billion worth of BTC affiliated with Silk Road. That happened after hacker James Zhong pled guilty to one count of wire fraud. In 2012, he manipulated the Silk Road transaction system to stash 50,676 BTC. Back then, one BTC cost around $10.

Subsequently, Zhong kept his identity and holdings hidden for a decade until their value rocketed to $3.3 billion. The filing explains, "The defendant had in his possession multiple computer servers, virtual private networks, among other things, enabling him to commit the offense."

Silk Road was used for the illicit trading of drugs and other goods before it was shut down in 2014. Its founder Ross Ulbricht was given a life sentence in 2015. The document states, "With respect to the 51,351.89785803 Bitcoin forfeited in the Ulbricht case before Judge Schofield, the Government has begun liquidating (selling) it."

The first transaction took place on March 14, when it "sold 9,861.1707894 BTC (of the 51,351.89785803 BTC) for a total of $215,738,154.98." The Government's net proceeds totaled $215,522,416.83.

Impact on the market

The US authorities intend to dump the remaining BTC throughout the year in four batches. Considering the state of the market, there are fears of the BTC price taking a hit. When the US government transferred over $200 million worth of bitcoin to Coinbase (COIN) on March 9, BTC was volatile – within 24 hours, it rose by almost 10% before eliminating those gains.

However, Kaiko researcher Conor Ryder has noted that less leverage in the BTC market could prove favorable, helping the coin resist the "sell pressures better than it did in the wake of last spring's Terra crash." In 2022, with fewer investors owning wallets with over $1,000 worth of BTC, the market was characterized by "weaker hands and greater leverage." Now, Ryder says, "There should be a quicker bounce back if there's sell pressure."

Whenever a novel technology arrives, big industry players get keen to experiment with it and try to implement it into their own products. From finance to medicine, blockchain has seen it all. Today we’ll talk about blockchain technology in video games, whether it’s an experience built from the ground up or an application of the tech to already existing projects.

What is Web3 Gaming?

Web3 gaming refers to decentralized projects where players have ownership of in-game assets, like a skin for your character or a rare item. In traditional gaming,  in-game digital assets and, ultimately, all the rights to them, are owned by the developer on centralized servers . They only give players permission to use them.

Primarily, Web3 games focus on play-to-earn mechanics by using cryptocurrencies and NFTs. They are based on decentralized networks like Ethereum or Solana, which guarantee verifiable ownership and give greater control to the players and their in-game items via crypto-secured gaming wallets. Besides items and currency, crypto wallets hold user identity as an alternative to regular accounts in traditional games.

Types of Web3 games

The first game to use blockchain technology was CryptoKitties, launched in 2017. Players would buy NFTs, each of them representing a virtual pet, which could be bred with others to create new NFTs.

Shortly after its launch, the game’s transactions made up 30% of the traffic on the Ethereum blockchain.

The Sandbox is another example of a blockchain game, which was released in 2018. It gives the opportunity to create in-game items and sell them to other players using game-specific cryptocurrency.

Axie Infinity, one of the most popular blockchain games by Sky Mavis, is a play-to-earn game which lets players buy and improve in-game NFTs via various actions. Those NFTs can later be sold to other game users by the developer. As a reward, a player that has worked on such an NFT gets compensation for their gaming assets in crypto as a part of the game's economy.

The game gained a lot of popularity during the pandemic. About a third of the project’s user base came from the Philippines, where some people even provided for their homes by playing Axie.

Following a hack in early 2022, during which Sky Mavis lost around $625M, the game's popularity expectedly dropped. Since then, the developers have removed all mentions of “play-to-earn” as the value of their tokens has plummeted.

The role of smart contracts in Web3 gaming

Smart contracts define the “rules” when it comes to blockchain games: all the logic and economy is written in them. That means that every player can see all of the transactions between other players, or, even better, the source code of the new features that the game developers have implemented, to make sure  everything is fair — for example, in terms of balance.

That is obviously a great advantage over traditional video games, where users don’t have any access to the source code of the project and can only experience or see the changes implemented in the game itself.

But the other, darker side of this transparency is that bad actors can take a look under the hood too, learn the architecture and the code, and like in the case of Axie Infinity, rob the developers and players of hundreds of millions of dollars.

Do gamers like blockchain?

Starting from 2021, big video game publishers like EA and Ubisoft tried implementing blockchain tech into their games and even stated that NFTs and decentralization were “the future of our industry.” Such statements received heavy criticism from the gaming community, resulting in abandonment of the planned features to be included in already released games, and even canceling entire games based on the distributed ledger technology.

Steam, a digital storefront service for PC games owned by Valve, banned blockchain games from being sold on the platform in October 2021. This came as an extension to their policy of banning games that held in-game items with real-world value.

The CEO of Valve later elaborated on the decision and said that while he believed that blockchain technology was legitimate, there were “too many bad actors in the market to allow cryptocurrency or NFTs onto Steam.”

Even without the bad actors, developers didn’t understand at the time how to integrate blockchain without any repercussions. After in-game customization items – “Digits” based on the proof-of-stake Tezos cryptocurrency – were added to Ghost Recon Breakpoint, players noticed that Ubisoft had outlined in their terms of service that the company carried “no liability” and was aware that blockchain “may be subject to specific weaknesses, which make them possible targets for specific cybersecurity threats."

Following an audience backlash, Ubisoft removed the announcement video from their channel and stopped “Digits” support in March 2022 altogether. It has since backed out on NFT plans.

It is safe to say that gamers don’t like to be bothered with NFTs implemented into their favorite games: clearly for them, the goal of the publisher is to earn more money rather than give full ownership to the players and remove central authority.

Industry veterans shifting into Web3 games

Dan Houser, a co-creator of the second best-selling game of all time — Grand Theft Auto V, has invested in a blockchain game development company called Revolving Games and joined the advisory board.

The team is currently working on a licensed Battlestar Galactica Eternity MMO blockchain strategy and an adventure role-playing game called Skybourne Legacy. Revolving has already raised around $20M for its decentralized gaming projects.

Peter Molyneux, another game developer famous for the Fable franchise, shifted to decentralized space in 2021 with his NFT-funded game Legacy, which is set to be a “blockchain business simulator.”

By the end of the same year, it had sold more than $50M worth of in-game land. The most expensive piece of digital property in this virtual world named “London” was sold for $900K. All of the sales were made through LegacyCoin, a cryptocurrency created for the game based on the Ethereum blockchain. Legacy is still in development and doesn't have a definite release window.

Web3 gaming as a separate entity

With the rise of scalability solutions for the Ethereum blockchain and many other factors, the Web3 gaming sector is expected to grow up to $65.7B by 2027.

While gamers don’t like when their games are fiddled with for questionable applications of innovative technology, leading publishers have demonstrated their utmost interest in blockchain tech. The most likely scenario is that blockchain-based gaming will create a segment of its own, like mobile games have over the past decade, rather than change the existing rules of the established video gaming industry.

Price dynamics

BTC price

Bitcoin dipped to $27,500 on Monday, March 20, and bounced back to a 7-day high of $28,792.01 on Wednesday, March 22. It then abruptly dove below $27,000 and headed up, surpassing $27,750 on Thursday, March 23. BTC spent most of Saturday (March 25) around $27,500, spiked at $28,245 the next day, and kept to just under $28,000. On Monday, March 27, its price ebbed below $27,000.

The Crypto Fear and Greed Index stayed in the greed territory with a slight dip on Thursday, March 23. Wednesday’s price dive followed the SEC's Wells notice to Coinbase and the news of its lawsuit against Tron founder Justin Sun. Both involved allegations of selling unregistered securities. Coinbase CEO Brian Armstrong explained that the notice concerned his company's "staking and asset listings" and "a Wells notice typically precedes an enforcement action."

On Friday, March 24, cryptocurrencies sank along with other risk-on markets on new concerns about the global banking system. Mere days after UBS's decision to acquire Credit Suisse, Deutsche Bank saw the cost of its default insurance soar and its stock plummet.

At press time, BTC is trading at $27,078.10, with a 24-hour loss of -2.9% and a 7-day change of -3.0%.

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ETH price

From $1,800, the Ether price edged to $1,825 on Tuesday, March 21, sank to $1,728.24 the next day, and jumped on Thursday, March 23, to a 7-day high of $1,845.81. Having slid below $1,750, it then seesawed above this level through Saturday, March 25. Afterward, ETH dipped and bounced back to teeter below $1,800 until Monday evening (March 27), when it almost hit $1,700.

Amid the banking crisis, Ether got significantly less attention than Bitcoin. The latter was touted as protection against the ongoing turmoil in the US, a narrative supported by prominent Wall Street figures like Cathie Wood. On Thursday, March 23, the ETH/BTC pair was 9% down month-to-date, headed toward 6-month lows.

Ether's peak on Thursday, March 23 ($1,855 as per CoinDesk data), was a year-to-date high and the highest price since August. This rally followed an increase in network activity. The Ethereum DeFi ecosystem grew along with the coin and daily fees. As a result, the network's Proof of Stake (PoS) tokenomics turned deflationary, driving revenue up by 10% in just 24 hours. Meanwhile, Matter Labs launched the mainnet of zkSync Era — the first publicly available zero-knowledge scaling system for Ethereum — on Friday, March 24.

At the time of writing, ETH is worth $1,731.95, with a 24-hour slip of -1.4% and a 7-day decrease of -0.7%.

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XRP price

XRP holders rejoiced at new upswings. The price rocketed from around $0.378 on Tuesday, March 21, and peaked at $0.493406 the next day. A decline and partial recovery ensued as XRP rose from a low of $0.418181. It traded between $0.425 and $0.450 on Friday, March 24, jumped higher on Saturday, March 25, and slid from $0.467. On Monday, March 27, XRP rose past $0.480.

XRP made steady gains ahead of a ruling in the SEC vs. Ripple case, which has been dragging on since 2020. Several prominent legal experts, including John E Deaton, expect a positive outcome for the blockchain firm. A critical defense argument is that the regulator failed to provide a "fair notice" before suing the company. The verdict is expected by the end of March.

Meanwhile, XRP whales continued to stack up tokens. The total balance for addresses with 10 million-100 million XRP is up by over 1% since February, corresponding to a 0.75% supply drop in the 1 million-10 million category. The 1,000-1 million XRP cohort also increased its holdings.

As of this writing, XRP is trading at $0.491556, with a 24-hour uptick of +6.8% and a 7-day surge of +30.3%.

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Cryptocurrency news

Traders flock to Bitcoin amid banking contagion fears

After a week of bank turmoil with another Fed hike, investors turned their sights to the top 10 cryptos. BTC and other non-stablecoin assets jumped early on Monday, March 27, with Ripple and Litecoin leading the gains.

BTC pushed above $28,000 in the early hours, but CoinDesk experts suggest that a consolidation at $25,000 is possible. Over the past seven days, XRP has gained roughly 30%, well ahead of Litecoin with around 10%. These tokens are trading at $0.469533 and $92.33, respectively. The total crypto market cap now stands at $1.17 trillion, according to CoinGecko.

Bitcoin's safe haven advantage

Last week's highlights included shaky banks and the Fed's 25-basis-point rate hike. Speaking to Forkast.News, Freeport cofounder Maxwell Goldstein explained: "Recent bank failures have also strengthened the case for investing in Bitcoin, along with murmurs of hyperinflation." Those fears prompt investors to seek "a safe haven asset, and Bitcoin fits the bill."

US equities reflected a change in sentiment – The Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite Index climbed on Friday, March 24. After the weekend, the US futures also edged higher.

US authorities tried to reassure worried investors. Admitting that "some institutions have come under stress," the Financial Stability Oversight Council claimed the US banking system remained "sound and resilient." Several Biden Administration officials have reiterated similar reassurances in recent weeks.

Yet that wasn't enough to quell the concerns. The biggest lender in Germany, Deutsche Bank, saw a stock sell-off on Friday, March 24, as the cost of its default insurance soared. So far this month, its shares have shed a fifth of their value.

Wells notice to Coinbase

Crypto investors are also closely following the SEC's action against Coinbase. On Wednesday, March 22, the leading US crypto exchange received a Wells notice alleging that its staking products constituted unregistered securities.

Custodia Bank founder and CEO Caitlin Long interpreted this as a sign that "the Biden Administration wants all crypto — even the legit parts of it — run out of the US."

According to Oanda Senior Market Analyst Edward Moya, the outcome of this case will strongly affect crypto prices. He said, "Coinbase's success is vital for longer-term crypto growth. In the US, Coinbase is a critical option for how people are getting started with crypto."

Bitcoin may not be ready to become a USD hedge

Bitcoin has surged amid the US banking crisis but may fail to become a USD hedge. According to Kaiko's research analyst Conor Ryder, outsized declines are possible in the near future due to low liquidity. More traders can now sway the prices, and support in both directions is weak.

As confidence in the US and EU banks crumbles, individuals seek alternatives to bank deposits. The risks of dollar savings are now as salient as during the 2008 financial crisis. In theory, Bitcoin must fit diversified portfolios perfectly. As a fully decentralized form of money, it is beyond the control of any entity.

However, Ryder also connects the upswing to the market structure – specifically, "fractured liquidity." Last week, BTC's market depth – "the number of orders waiting to be filled on an order book" – hit 10-month lows. Thus, the coin met with little resistance as it rocketed. Low liquidity corresponds to high volatility and weakened support in both upward and downward directions.

Liquidity exodus

The market is still grappling with the liquidity gap created by the FTX fiasco. The failures of the Silvergate and Signature banks made it worse by depriving market makers of USD payment rails. As a result, liquidity has been leaving order books.

Furthermore, Binance has reintroduced fees for BTC-USDT and BTC-BUSD trading, forcing market makers to accept tighter spreads. BTC-USDT, the most liquid pair in crypto, fell by 70% on Binance overnight. BTC-TUSD is the only zero-fee alternative left, but it is unclear if liquidity will flow into it.

The solution, not the cause

CoinDesk's Adam Blumberg is more optimistic — he goes so far as to call crypto "the solution to bank runs." The TradFi crisis, he suggests, may prove favorable as BTC was created for such scenarios, and blockchain technology has three crucial advantages:

• Self-custody: Trust in conventional financial institutions is crumbling despite stringent government regulation.
• Transparency: Bank asset pools are less transparent; depositors do not know how much liquidity is available and may withdraw out of fear.
• Immediate settlement: The crypto system is on 24/7 with instant or near-instant settlement; for banks, there is a time mismatch between loans and securities – as the latter don't settle instantly, banks may have trouble freeing capital.

Blumberg mentions two prerequisites for continued adoption. First, individuals and entities must realize that crypto is a better financial system. Secondly, crypto custody must become safer, which requires the participation of "financial professionals, including advisors, CPAs, and lawyers."

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Price dynamics

BTC price

Bitcoin made spectacular gains. Rising from roughly $21,300, it approached $25,940 on Tuesday, March 14, lingered below $25,000 for a while, and shot up on Friday, March 17. After touching $27,800 the next day, BTC dipped on Sunday, March 19, and resumed growing, eventually breaching the $28,000 level. On Monday, March 20, it topped out at $28,500.16 and returned to $28,000 in the late hours.

On Saturday, March 18, the Crypto Fear and Greed Index switched back to greed, with a 13-point increase over 24 hours. This rise came amid fears of new cracks in the US and EU economic landscape. Following the liquidation of Silvergate Bank and the shutdown of Signature Bank, the US government guaranteed a backstop for local institutions. However, traders still drove the shares of other regional banks down.

Meanwhile, Bitcoin "has shown its superior risk and inflation resistance as an alternative asset, and will be further recognized by the mainstream," according to James Wo, founder and CEO of DFG. He summed up the sentiment, saying, "The market's confidence in traditional finance was dented, leading to a shift of funds to the crypto market."

At press time, BTC is trading at $27,907.93, with a 24-hour shift of +0.1% and a 7-day rise of +15.3%.

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ETH price

Ether also rose through the week. From around $1,550, it reached $1,773.87 on Tuesday, March 14, dipped below $1,600, and soared above $1,750 on Friday, March 17. After peaking at $1,836.54 on Saturday, March 18, ETH traded below $1,800 and concluded the weekend with a slight jump. It then descended again on Monday, March 20, returning to just under $1,800 and eventually touching $1,770.

Last week, technical analysts noted firm support at $1,600, a potential foundation for further gains. Moreover, the Shanghai upgrade, slated for April 13, is expected to boost the ETH price by "effectively de-risking staking for retail and institutional investors." By enabling withdrawals of ETH staked since 2020, it will conclude the network's transition to Proof of Stake.

ETH’s drop on Saturday, March 18, coincided with a sizable whale transfer — one unknown wallet sent ETH worth $33 million to Binance. As a potential sign of diminishing sentiment, this move raised fears of a massive sell-off. Whales may dump a specific asset in large amounts when they doubt its potential or believe its price has peaked.

At the time of writing, ETH is worth $1,753.21, with a 24-hour slip of -1% and a 7-day increase of +4.4%.

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XRP price

Like Ether, the Ripple token made gains that were dwarfed by Bitcoin. From around $0.365, it rose to $0.385 on Tuesday, March 14, dipped to nearly $0.360 the next day and jumped to $0.380 on Friday, March 17. During the weekend, the price approached $0.387 before sliding below $0.380 again. It then reached $0.398524 and headed down. On Monday, March 20, XRP fell to $0.377.

Despite the recent market rally, XRP whales have entered a selling frenzy, offloading almost 30 billion tokens in the past week. According to Beincrypto analysts, since the FTX fiasco, crypto investors have often sold shortly before price drops. However, this sell-off is not the only negative signal.

The developer activity on the network has also declined. A fall of over 60% since mid-February translates into fewer resources and less attention directed toward enhancing the XRP Ledger. That said, positive expectations around the SEC vs. Ripple case support a positive long-term picture.

As of this writing, XRP is trading at $0.387828, with a 24-hour uptick of +1.2% and a 7-day gain of +3.9%.

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Cryptocurrency news

BTC surges as central banks prepare to stem bank risk

Following another week of banking turmoil, Bitcoin rocketed above $28,000 early on Monday, March 20. The majority of the non-stablecoin top 10 followed suit. This rally came after several central banks launched a joint effort to support market liquidity through cash influxes. Another consequential event was UBS's emergency acquisition of Credit Suisse.

Bitcoin broke the $28,000 ceiling for the first time since mid-June 2022. The leading cryptocurrency is now over 66% up year-to-date. Meanwhile, the total crypto market capitalization rose 2.1% in the past 24 hours to $1.22 trillion, per CoinGecko.

Central banks join forces to mitigate crisis

On Sunday, March 19, the Federal Reserve announced a coordinated move to pump more US dollars into markets through "the standing US dollar liquidity swap line arrangements." This action involves the central banks of Canada, the UK, the EU, Switzerland, and Japan. These institutions will "increase the frequency of 7-day maturity operations from weekly to daily."

US equities reacted to the news by edging higher after Friday drops. By 9 AM Hong Kong time, the Dow Jones Industrial Average and the S&P 500 futures had gained modest ground, along with a 0.41% increase for the Nasdaq Composite Index.

However, the First Republic Bank stock is still down despite a $30 billion injection to cover uninsured deposits. S&P Global has downgraded the bank's status to junk, explaining that the infusion may only ease short-term liquidity pressures. At the time of this writing, the shares are trading at roughly $12, with a devastating loss of 82.13% over the past month and 47.11% over the past 24 hours.

Inflation: New hikes ahead?

The University of Michigan has reported a decline in the US consumer sentiment index in March. This first dip in four months suggests the Fed's unrelenting hikes of the past year have finally caused some cooling. However, most of the interviews for that preliminary release had been completed before Silicon Valley Bank’s failure.

Furthermore, CNBC's Jeff Cox notes that the slowdown in inflation has been linked to an energy price decline. According to the Labor Department, the Consumer Price Index gained 0.4% in February, a 6% 12-month increase. As a result, the latest report bolsters expectations of another rate hike.

The current benchmark rate range — from 4.5% to 4.75% — is the highest since October 2007. The next FOMC (Federal Reserve Open Market Committee) meeting is scheduled to begin today. At press time, the CME FedWatch Tool shows 80.1% probability of a 25-basis-point hike against 15.9% for no change.

US banking crisis highlights opportunities for crypto in Europe

The banking crisis has taken a toll on crypto-friendly banks in the US, but European businesses may capitalize on the fallout. As a result, Europe, which has often lagged behind in crypto volumes and adoption, may finally forge ahead.

If American bankers wait too long to welcome crypto firms again, businesses may start looking elsewhere. Conor Ryder, a research analyst at Kaiko, suggests that the longer it takes the banks to take in "some of the millions of dollars once parked at Silvergate," the more likely this exodus scenario.

The US crypto market is plagued by regulatory vagueness, with obstacles to dollar on-ramps. Constantly changing headwinds force businesses to stay vigilant. In stark contrast, Europe is implementing the first comprehensive framework — MiCA (the Markets in Crypto-Assets Act). It offers more regulatory clarity and more convenient fiat payment rails.

Fading appeal of US dollar

According to Ryder, fiat currencies — specifically, the US dollar — are becoming less attractive for investors. Stablecoins have already eclipsed fiat on exchanges, constituting over 90% of volumes in the last year alone.

Still, while the banking cut-off may not directly affect crypto investors, it is bound to create problems for trading platforms. For instance, they may only be able to serve customers during official US trading hours.

Meanwhile, the BTC-EUR volumes spiked In the aftermath of the Silvergate collapse. Ryder notes that the pair's advantage over USD hit an all-time high last week — 21% of BTC volumes compared to 7% in November.

Favorable narrative

CoinDesk's George Kaloudis is a strong believer in the power of market narratives, and he is not alone. Even Fed Chair Jerome Powell once said that “people's expectations of inflation have a real effect on inflation.”

As Kaloudis notes, it was not crypto that caused three US banks — Silvergate, SVB, and Signature — to collapse. What spelled their demise was the pressure from persistently hawkish interest rates, the Fed’s policy of the past year. Thus, the current narrative may support Bitcoin's image as a viable alternative to TradFi.

Summing up the macro backdrop, Andrew Kang tweeted that it has "never been more perfect" for BTC. Among the reasons, Mechanism Capital co-founder cited a "mediocre" yield on bonds, the fading appeal of equities, and the upcoming moderation of the Fed's hikes due to "economy slowing & global financial system turmoil."

Finally, Signature Bank's failure caused major stablecoins to depeg, albeit temporarily. Despite USDC's rapid recovery, the dip highlighted counterparty risks for the stablecoin, a feature it shares with the US dollar. Kaloudis sees those concerns as another factor supporting Bitcoin's appeal.

Price dynamics

BTC price

Bitcoin was idle at around $22,500 before dipping to $22,000 on Wednesday, March 8, and cratering below $21,700 the next day. The price reached $20,207.42 early on Friday, March 10, and hit a seven-day low of $19,662.44. After trading above $20,640 at the start of the weekend, BTC kept close to $20,400. It regained ground on Monday, March 13, ricocheting to over $24,300.

On Friday, the Crypto Fear and Greed Index slid to fear as US regulators seized Silicon Valley Bank. Its downfall was triggered by what Ryan Falvey, a Restive Ventures fintech investor, called a "hysteria-induced bank run caused by VCs." Resulting in the second-biggest banking failure in US history, it also led to the shutdown of Signature Bank.

Due to its issuer’s exposure to SVB, USDC lost its peg, and DAI and PAX followed suit. On Saturday, March 11, the total crypto market cap shrank to under $920 billion for the first time since November 2022. Eventually, regulators' interventions allayed investor fears, triggering a crypto rebound.

At press time, BTC is trading at $24,528.00, with a 24-hour gain of +10.1% and a 7-day rise of +9.4%.

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ETH price

ETH dove and rebounded, tailgating BTC. It lay flat at about $1,570 until Thursday, March 9, when it dipped and plunged nearly vertically. After sinking below $1,430, the coin hit a seven-day low of $1,379.43 on Friday, March 10. ETH then bounced back quickly, approaching $1,470 early on Saturday, March 11. It maintained that level through the weekend and touched $1,700 on Monday, March 13.

The banking domino effect was not the only factor sparking a plunge. On Friday, March 10, New York Attorney General Letitia James called ETH, LUNA, and UST "securities and commodities" in a lawsuit against KuCoin. That was the first time a US regulatory official mentioned the possibility of treating ETH as a security.

Such a classification may have broad implications for the industry, although the effects on the Ethereum network and token are unclear. However, the crypto advocacy group Coin Center, which detailed why Ether was not a security in 2018, refuted those assertions, reiterating its arguments.

At the time of writing, ETH is worth $1,682.01, with 24-hour growth of +5.2% and a 7-day increase of +7.3%.

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XRP price

XRP rose through the first half of the week. After dipping to roughly $0.363, it reached above $0.397 on Thursday, March 9, tumbled, and bounced back from $0.366799 around midnight. The next day brought a deeper fall — to $0.361285. Subsequently, XRP traded above $0.366 until a 7-day low of $0.353672 on Sunday evening. On Monday, March 13, it regained momentum, reaching $0.377 in the late hours.

XRP's performance was hindered by its confirmed exposure to Silicon Valley Bank. On Monday, March 13, CEO Brad Garlinghouse tweeted that SVB had been Ripple's banking partner holding some of its cash balance. However, the tech company did not expect any disruption to its day-to-day operations, and it kept most of its US dollars in "a broader network of bank partners." Yet XRP failed to match the performance of BTC and ETH.

However, the week brought a few small victories in the ongoing SEC vs. Ripple court case. The judge granted Ripple's motion to remove an SEC's expert witness and rejected the regulator's motion to remove John E. Deaton, a crypto-focused lawyer, as a witness for Ripple.

As of this writing, XRP is trading at $0.370967, with a 24-hour uptick of +1.1% and no 7-day change.

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Cryptocurrency news

Investors relieved as USDC regains peg

On Friday, the crypto market was shaken as Silicon Valley Bank became the largest US lender to fail in over a decade. The exposure of Circle, the USD Coin (USDC) issuer, to SVB caused the second-largest stablecoin to depeg the US dollar. However, the dip proved temporary.

The toll on Circle

USDC is the market cap runner-up behind Tether (USDT). On Saturday, March 11, Circle's token fell as low as $0.87, sending a shudder through digital assets. However, recovery ensued — at press time, USDC is back at $1, according to CoinGecko, and its market cap has shed around $4 billion, dropping below $40 billion.

The price rebounded after Circle Internet Financial Ltd. pledged to cover any shortfall in $3.3 billion reserves held at SVB. However, the share of the USDC cash reserves parked at the bank is unknown. The company only acknowledged that "Silicon Valley Bank is one of six banking partners Circle uses for managing the ~25% portion of USDC reserves held in cash."

Dante Disparte, Circle's Chief Strategy Officer, described the collapse as a "black swan failure" in the US financial system, warning of "broader implications for business, banking, and entrepreneurs" unless a federal rescue plan was implemented. The company has also reiterated that USDC is fully backed by cash and US Treasuries.

Confidence in the outcome

Insured deposits of up to $250,000 (the Federal Deposit Insurance Corp.'s protected limit) became available on Monday. Financial regulators are determined to make a share of the uninsured deposits available through asset sales as soon as possible. According to Bloomberg, the initial figures discussed behind the scenes fall into a 30%-50% range.

Circle has expressed confidence in those efforts. While "SVB may not return 100% and that any return might take some time," the company will "stand behind USDC and cover any shortfall using corporate resources, involving external capital if necessary."

Interpreting the market plunge

Spencer Hallarn, a derivatives trader at GSR, has described the market reaction as a "two-sided flow in some just freaking out and wanting out of USDC." On the other hand, some crypto investors switched to USDT "as a temporary hiding place."

The USDC dip affected decentralized applications (Dapps), many of which rely on trading pairs involving the stablecoin. It also pushed other stablecoins, such as Dai (DAI) and Pax Dollar (PAX), closer to their pegs. As a result, the Dai community has suggested changing its dollar-pegging mechanism. Meanwhile, USDT has maintained the peg, as Tether has no SVB exposure.

Silicon Valley Bank shutdown shows banking, not crypto crisis

Last week, Silicon Valley Bank (SVB), a pillar for the US startup and VC community, collapsed in less than 48 hours. The closure came fast on the heels of Silvergate Bank’s voluntary liquidation, but its outcome is fundamentally different — the government has stepped in to take SVB over.

While both California-based banks faced similar scenarios, only SVB, whose ties to crypto are weaker, got federal assistance through the Federal Deposit Insurance Corp. (FDIC) receivership. Meanwhile, Silvergate Corp. announced that all deposits would be repaid.

Silvergate liquidation vs. Silicon Valley Bank shutdown

Silvergate was unequivocally focused on digital assets — along with the now-closed Signature Bank, it was one of the two primary lenders for the industry. It even ran a proprietary exchange network, SEN, facilitating off-blockchain money transfers between big investors and crypto exchanges like Gemini and Coinbase.

SVB was 20 times bigger, and its collapse was the second-biggest US banking failure after the Washington Mutual blow-up in 2008. A relatively conventional bank providing deposits and loans, it was also deeply tied to the tech industry. It served a lot of crypto startups and venture capitalists — almost half of US VC-backed startups held cash at SVB.

Both banks faced a surge in withdrawals, which led to the liquidation of securities held as reserves. Previously, the Fed's interest rate hikes had pushed the bond prices down, eating away at the value of the banks' portfolios. Massive write-downs ensued.

On Wednesday, March 8, SVB announced that it was selling a portion of its securities for a loss due to a surge in deposit withdrawals. As its attempts to shore up investor confidence failed, the scenario became a "self-fulfilling spiral," according to Charles Forelle, Wall Street Journal Financial Editor. The deposit flight accelerated the next day, partly as the community SVB served was tightly knit.

Problems with banking, not crypto

Fortune's Jeff John Roberts believes both failures stem from a conventional finance crisis rather than crypto volatility. The root cause is the "banks' large holdings of bonds and T-bills purchased during the environment of near-zero interest rates, and that they are now selling at a loss as customers pull their deposits."

Michael Barr, the Fed's Vice Chair for Supervision, has admitted the regulators' "very light-touch approach" to relatively small lenders like SI. With their balance sheets less policed, such banks get more freedom for innovating and exploring fintech opportunities.

Meanwhile, a few giants deemed systemically important have been obliged to "hold ever-larger amounts of capital aside — sometimes over the loud complaints of bankers — so that their health would be beyond reproach," according to Bloomberg.

Thus, the regulators may be misguided in their persistent vilification of cryptocurrencies. Crypto advocates, who have long warned against printing money amid near-zero interest, could interpret this crisis as validation of their stance.