5 Industry Experts Share Market Insights

• Insider asked crypto executives and pundits where the industry will go after critical partners fail.
• Markets are likely to be more volatile and less liquid in the short term, a co-founder said.
• Others see a bull case for decentralized finance and parking assets in non-custodial wallets.

The crypto is facing a banking problem, with three of the industry’s crucial financial partners shutting down last week.

Silicon Valley Bank, Silvergate Capital and Signature all closed, and each had separate ties to the trillion-dollar market.

Venture capital funds and crypto-friendly digital asset firms held cash in SVB, which is now the second-largest bank failure in history. Circle, the company behind the No. 2 USDC stablecoin, holds $3.3 billion in cash reserves with the now-defunct bank.

Silvergate, which served crypto clients like Coinbase and Kraken, also closed after a prolonged decline in client deposits that began last year, along with a host of other financial issues. And on Sunday, Signature was seized by regulators after fears of the banking crisis spreading.

The surprising failure of crypto-friendly banks is “undoubtedly a blow to the industry,” a blockchain executive told Insider, adding that if alternatives cannot be found, it will be “difficult for the industry.” industry to regain its former glory”.

“One of the trends that has contributed to the growth of the crypto industry since 2017 has been the increasingly close ties between regulated financial institutions, centralized crypto services, and decentralized finance,” Ran said. Hammer, vice president of business development at blockchain infrastructure provider Orbs.

Hammer added: “However, with significant macroeconomic shifts in the financial world, the delicate balance that existed appears to have spiraled out of control, resulting in massive failures in [centralized finance] and now also the old financial institutions.”

More volatility and banking alternatives

Both Silvergate and Signature offered real-time payment platforms for customers, bolstering liquidity for some of the biggest crypto players.

Now, markets are likely to experience increased volatility and decreased liquidity for some tokens in the short term, Thanh Nguyen, co-founder of blockchain security firm Verichains Lab, told Insider.

Meanwhile, renewed interest in central bank digital currencies (CBDCs) could occur as the industry recovers from a crisis of confidence following jolts in stablecoin markets.

“CBDCs could provide a safer and more stable way to enter the crypto market by allowing investors to buy and hold CBDCs directly, without the need for intermediaries such as banks, which could in turn in turn help mitigate the impact of failing crypto-friendly banks,” Nguyen said.

Others saw the fallout as a bullish case for decentralized finance, particularly the parking of assets in non-custodial wallets and out of a third-party intermediary.

“Fed policies exposed flaws in the banking system and made the case for the self-custody that decentralized cryptocurrencies were designed to provide,” Andrei Grachev, managing partner at the market maker, told Insider. of digital assets and investment firm DWF Labs. .

And a blockchain gaming executive said the relationship between traditional banks and crypto has also taken another blow, which could also impact America’s lead in crypto innovation.

“This situation again opens up an opportunity for financial institutions in other jurisdictions to take the lead,” Oleg Fomenko, co-founder of blockchain game developer Sweat Economy, told Insider.

Finally, banking and financial institutions will face more investigations and deleveraging in the coming months.

Youwei Yang, chief economist at crypto-mining firm BTCM, told Insider that the ecosystem could return to the days when no big banks did business with crypto.

However, the fallout from SVB could make crypto purer as its original purpose as a peer-to-peer cash system takes on more significance, Yang added. “DeFi will expand to combat the dearth of access to banks, as you can see the recovery of the DeFi sector over the weekend has been extraordinary.”