☕️ This Major Crypto Bank Just Crashed 🏦 😳
Here's why this collapse could make crypto banking a lot more difficult 📉
Crashes. There are good ones and bad ones. Black Monday? The stock market crash that heralded in the Great Depression? Undeniably bad.
Crash Bandicoot? The high-spinning, fruit-collecting bandicoot who changed the face of gaming in 1996? Pretty good.
Crash (2004) beat out Brokeback Mountain for Best Picture so it must be good, but it’s been mocked for years for its oversimplification of race relations! Which is it!?
In today’s newsletter, we’re going to introduce you to a new crash and you can decide for yourself if it’s good or bad. (SPOILER: It’s bad).
Espresso Shots
☕️ JPMorgan Breaks Up with Gemini? 💔 😭
Banking giant JPMorgan is apparently ending its banking relationship with troubled crypto exchange, Gemini.
Coinbase, a the United States' largest crypto exchange, took the time to pettily and publicly state that its banking relationship with JPMorgan is still fully intact.
Gemini, the crypto exchange headed up by the Winklevii twins has had a rough year with the collapse of Gemini Earn, a slew of lawsuits and layoffs, and the departure of several high level executives.
Despite the widespread publication of JP Morgan's decision, Gemini tweeted out this denial:
Despite reporting to the contrary, Gemini's banking relationship remains intact with JPMorgan.
— Gemini (@Gemini)
Mar 8, 2023
It would seem that in the classic, early 20’s break-up style in which the decision is bounced off several groups of friends, Gemini will be the last to know they’re about to have their heart broken.
☕️ U.S. Senate Fears Climate Impact of Bitcoin Mining 🌳 ⛏️
Massachusetts Senator Ed Markey (D) is voicing concerns about the environmental impact of crypto mining.
Markey, a progressive who has long backed environmental legislation, chaired a committee hearing this week to discuss the environmental impact of crypto mining.
“It has grown explosively in the United States over the past two years,” said Markey. “It is extremely energy-intensive. And we’ve seen it harm the general public while enabling the creation of heavily-concentrated wealth in our country.”
Markey and other senators are proposing a bill that would force crypto companies to be more transparent and disclose more information about their physical, day-to-day operations.
When one year of U.S. Bitcoin mining creates as many carbon emissions as 7.5 million gas-powered cars—we have a problem. Today's hearing made that even clearer. The crypto industry is growing, but so is the fight for climate justice. We will hold these companies accountable.
— Ed Markey (@SenMarkey)
Mar 7, 2023
Markey finished his remarks by urging crypto companies to, “work smarter, not harder.”
Weirdly, “work smarter, not harder,” was exactly what my cousin Fred said when he sent me an entire semester’s backlog of answers to our high school’s algebra tests.
☕️ More Asks From SBF 🛍️ 🖥️
U.S. Attorney Damian Williams, a member of Bankman-Fried’s defense team, has again petitioned Judge Lewis Kaplan for more special treats for our special boy.
Those treats would come in the form of a series of quality of life adjustments while Sam awaits trial.
Adjustments such as the ability to place food delivery orders, shop on Amazon, and keep up with sports and crypto news: he should probably subscribe to coffee & crypto.
SBF may not have the best of luck with this new proposal as all previous, similar requests have been turned down.
But part of this agreement involves the installation of security tech on the Bankman-Fried’s family computer that, “activate the device’s camera when the device is being used and take video or periodic photographs of the user.”
Surveillance built into the family computer? This kind of tech could be extremely disrupting to the being a thirteen-year-old boy industry.
Spilling the Beans
Silvergate-gate
Crypto Bank, Silvergate, is having more than a little trouble. That crash we were talking about earlier? That’s happening now, and it’s calamitous.
How did Silvergate get so unstable? Well, unfortunately like most of the current problems in modern crypto, we can trace the problem back to one incompetent, curly-haired culprit.
When it comes to crypto dysfunction, all roads really do lead to FTX.
All of that money disappearing was devastating to the crypto-friendly bank.
In addition to losses incurred from FTX exposure, Silvergate has run into numerous regulatory issues in the American banking of crypto.
The bank announced that because of some internal troubles and a “going concern” about its inability to continue in light of recent problems, the bank would need at least an additional two weeks to file its annual report.
This seemed to be the final nail in Silvergate's coffin.
Like in the animal kingdom, Silvergate showed obvious signs of weakness and the market responded.
Everything came to a head on Thursday, March 2nd, when Silvergate stock plummeted a precipitous 45%. It seemed they really couldn't come back from that.
But the end was coming for Silvergate even earlier that.
In the wake of the bank's problems, major firms and exchanges were stepping away from Silvergate like the diseased, financial pariah it was sure to become.
At Coinbase all client funds continue to be safe, accessible & available.
In light of recent developments & out of an abundance of caution, Coinbase is no longer accepting or initiating payments to or from Silvergate.
— Coinbase (@coinbase)
Mar 2, 2023
In addition to Coinbase, Crypto.com, Bitstamp, Circle, and Gemini all stepped away from what was clearly an untenable situation at Silvergate.
And all of these entities parted ways with Silvergate before that damning stock drop.
But Silvergate has drawn more than the concerned eyes of crypto exchanges, Silvergate’s problems have even caught the attention of the Biden White House.
Silvergate’s issues certainly fall under the White House’s new initiative for reducing crypto risk for Americans. An initiative expressly detailed in a series of reports, the “First-Ever Comprehensive Framework for Responsible Development of Digital Assets.”
And though the White House is aware of the ongoing situation with Silvergate, they’re not going to speak out against or criticize the crypto bank, simply because they haven’t done that for any other specific crypto entities.
“I won’t speak to this particular company as we have not on other cryptocurrency companies, but we’re going to continue monitoring reports, and currently we’re aware of the situation,” said White House Press Secretary Karine Jean-Pierre.
Whether the White House is going to take action or not, it seems that Silvergate’s fate may already be sealed.
Silvergate announced on Wednesday that it intends to voluntarily liquidate and slow down operations until an eventual cease, the financial equivalent of falling on your own sword.
Honestly, we have to respect Silvergate not delaying the inevitable insolvency.
Now it’s just a matter of having its assets cannibalized by other banks and corporations like hungry sharks feeding on the corpse of… another shark.
Crypto firms and exchanges will now have to flock to their second-choice bank, Bronzegate.
Meme of the Day
SBF's team has submitted a formal request to push bedtime an hour later.
SBF until the judge gives him permission to stay up late:
— Coffee & Crypto Daily (@GetCoffeeCrypto)
Mar 8, 2023
Crypto 101
CEX: A CEX is a centralized exchange, the opposite of a DEX or decentralized exchange.
On a centralized exchange, users can purchase cryptocurrency using other crypto or fiat currencies such as USD or the euro.
Some examples of CEXs are Binance, Coinbase, or Gemini. FTX was also a centralized exchange, and a cautionary tale of the risks associated with using a CEX.
The Last Sip
If Judge Lewis Kaplan grants these privileges to SBF’s pretrial conditions, here are some more permissions that SBF and his team intend to push for:
- Later bedtime.
- A sip of his dad’s beer.
- Access to the restricted section of his parents’ library.
Stay Caffeinated,
Coffee & Crypto Team
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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.