Market SHOCK (What Is Going On

GM Readers!📪 It's BitDegree Insider, and what a weekend this was!

⭐️Today's selection:

• ⚡️Market Shock (What Is Going On?!)
• 💰Venture Mondays
• 👌Selected Meme of The Day
• 📰Bite-Sized News

⚡️⚡️⚡️MARKET SHOCK⚡️⚡️⚡️

This weekend was intense. You could even say that everything everywhere, all at once is what happened. But in crypto.

The market saw a massive selloff of short positions yesterday, with $187 million in value being liquidated over just 24 hours. Poor traders…

Picture this: traders all over the world were bracing themselves for a market crash after a string of events shook the market to its core.

But something unexpected happened - the market made a dramatic turnaround and is now in the green. How did this happen?

What caused the initial dip, and what's been going on since then? In this today's issue, we'll take a deep dive into the events that unfolded, the reactions of traders, and ultimately, how the market managed to come out on top.

SILICON VALLEY BANK COLLAPSE TRIGGERS USDC SELL-OFF. WHY?

From Friday to Saturday (depending on where in the world you are), the USDC stablecoin lost its dollar peg.

Moreover, the drawdown was 15% and the token was trading at $0.85 for some time…

Let's start with the fact that 25% of the total USDC collateral was in Silicon Valley Bank, which, unfortunately, declared bankruptcy.

This was openly announced on Twitter. Actually, this caused a wave of panic, which prompted everyone to withdraw their funds

Exchanges reacted quickly and there were statements about the suspension of automatic USDC to BUSD conversion by Binance, and USDC to USD by Coinbase.

However, soon after that, Binance announced that it would add a number of stables to the trading pairs, including the collapsed USDC. They rolled out detailed conditions in a thread.

Of course, arbitrageurs became more active. As a result, liquidity was pumped out very quickly.

An interesting event was that the whales began to buy the token very actively. An important decision was in their hands - either to earn money, or to provide a measure of support.

Massive sell-offs could have caused an Domino effect like never before. But the token was saved.

Vitalik Buterin and Justin Sun, as well as a bunch of various investment funds, were seen among the whales who bought off the USDC.

In connection with these events, the Fed called an emergency meeting, which we are about to describe below.

And the Fed really had enough grounds to feel worried. The whole situation developed... Rather awkwardly.

HOW THE SITUATION UNFOLDED

After Circle (the USDC issuer) reported that $3.3 billion of their reserves was stuck in SVB, the stablecoin USDC lost its peg to the dollar.

Because of this, users began exchanging their assets for other coins. However, not all investors were lucky enough to get their money back. And it was disastrous for some.

Here's how one unlucky user paid $2,080,468.85 to receive $0.05 of USDT.

The panicking investor forgot to set the slippage, which would have allowed the transaction to occur at the exact price of the token.

As a result, a Maximum Extraction Value (MEV) bot was able to make a profit of over $2 million, with only $45 spent on gas and $39,000 on MEV payoffs.

MEV bots are operated by third-party miners who are able to extract additional value from transactions. This can include things like front-running, where the bot anticipates and executes a trade before the original transaction takes place.

While MEV can provide additional profits for miners, it can also result in losses for unsuspecting users.

So it happened that the router mysteriously routed a $2M trade through a dead UniswapV2 pool with $2 of liquidity. Ouch.

In light of this situation, it's important to carefully verify information and transfer methods before making any transaction!!!

But the disaster didn't last long for everyone. We are back up again. Why?

THE FED ENTERS THE GAME

The US financial sector is experiencing some turbulence, with three banks - Silvergate, Silicon Valley Bank, and Signature - closing their doors in the last week.

However, the US government has stepped in to provide support and ensure that depositors are protected.

The Federal Reserve recently announced its willingness to provide additional funding to banks through the new Term Bank Financing Program (BTFP).

The Fed will offer loans of up to one year to financial institutions to help them meet the needs of their depositors and cover paper losses resulting from securities depreciation in their portfolios.

While this news is certainly positive, it's important to remember that the problems of inflation and the US national debt limit have not disappeared. The Fed cannot simply turn on the money printer as it did in March 2020.

It's worth noting that all three closed banks had worked with crypto companies. Despite this, cryptocurrencies cannot be blamed for the current crisis!

In a joint press release, the Department of Justice, Federal Deposit Insurance Corporation (FDIC), and Federal Reserve declared that all deposits of Silicon Valley Bank and Signature Bank will be protected by the state.

US financial regulators (DOJ, FDIC and Fed) issued a joint communiqué on the situation in the banking sector.

Recall that on Friday Silicon Valley Bank declared bankruptcy. It was the biggest collapse of an American bank since 2008.

Naturally, It led to massive unrest among companies and ordinary investors.

In response, the Federal Reserve Board will provide $25 billion to fund banks and other depository firms.

This program is called BTFP (Bank Term Funding Program) and will allow institutions to take out term loans with repayments up to 1 year.

The goal of the BTFP program is to provide sufficient liquidity to meet customer requests should they wish to withdraw funds.

We can expect the Fed to hike interest rates.

The Fed will make its decision at a meeting on March 22. Interest rates currently range from 4.5% to 4.75%, the highest since October 2007.

As a response to the unstable situation, Binance has announced that they're about to convert their $1 billion dollar industry recovery fund from BUSD to native cryptos including BTC, BNB, and ETH.

Well, more stability and a financial safety net will not hurt anyone. We shall see!

TL;DR: Due to the bankruptcy of the Silicon Valley Bank, USDC lost its peg for a while. Panic spread all over the place. Internal banking crisis continued spreading within the US, which resulted in more panic sell-offs, unusual trading activities, and the Fed gathering for a special meeting about how to save depositors' money from the failing banks.

VENTURE MONDAY

It's important to keep in mind that regardless of the current state of the market, whether it's experiencing gains or losses, the cryptocurrency industry continues to receive significant investments.

Native zkEVM Scaling Solution for Ethereum Scroll raised $50M in a new funding round. Polychain Capital, Sequoia China, Bain Capital Crypto, Moore Capital Management, Variant Fund, Newman Capital, IOSG Ventures and Qiming Venture Partners are among investors.

Scroll is a technology that aims to improve the scalability of Ethereum by using zkRollup, which allows transactions to be processed off-chain and then submitted to the Ethereum blockchain for verification.

Moreover, it's worth noting that this is not the first instance of Scroll raising funds. With this new round, the company's total funding now stands at $83 million. What's even more impressive, however, is the fact that the latest investment has raised Scroll's valuation to $1.8 billion.

Are you curious about how you can benefit from Scroll's new funding round? Well, there's an exciting opportunity for you to participate in their testnet and potentially earn an airdrop!

To get started, simply follow the official guide on how to use the testnet. This testnet is completely free and allows you to experiment with the new Layer2 solution that Scroll is developing. You can also check out their official list of features and functionalities here.

Now, to maximize your chances of receiving the airdrop, it's important to stand out among the many participants. One way to do this is by deploying a contract and a token on the testnet. This will show that you have a good understanding of the platform and its fundamentals.

We've found two helpful guides for you to get started:

1. This one. 2. Or this one.

So go ahead and give it a try! Good luck and happy testing!

SELECTED MEME OF THE DAY

BITE-SIZED NEWS

• NFT Marketplace OpenSea Fixes a Bug that Could Have Exposed Users' Identities. Bug-free zone.
• South Korea Rolls Out a Fund to Boost Metaverse Development. They just ignore the noise, and keep on going forward.
• Nissan Expands Its Web3 Footprint with 4 New Trademarks. Web3 space gettin' more and more trademarked.