The last 24-48 hours were yet another shocker for the crypto industry with the stock crash of Silicon Valley Bank (SVB). Though not a direct impact on Indian exchanges’ business, but popular crypto tokens trading on these platforms including Bitcoin, Ethereum, XRP, Binance Coin, Doge Coin, Shiba Inu among others crashed between 5-9 percent on March 10.
At about 7:10 pm on WazirX, Bitcoin’s price was down by 6.27 percent, Ethereum’s price plunged 8.03 percent, Doge coin was trading down by 6.71 percent, XRP was down by 6.01 percent and Binance coin by 5.31 percent respectively.
Indian crypto industry players, however, are not worried by this impact immediately as they see this as a reflection of how global exchanges and token prices are reacting to SVB’s stock market crash. SVB held funds of most top crypto exchanges and startups in the US.
Both crypto-focused bank Silvergate and SVB were giving banking services to retail and institutional customers who were trading into crypto. So the customers could essentially withdraw the fiat currency or USD held in their accounts with these banks to buy crypto tokens on regulated exchanges. Many of the top crypto exchanges globally held their funds with these banks too.
Meanwhile, US president Joe Biden’s budget proposal for 2024 which came out a day ago, made significant changes and increase in various aspects of crypto taxes in the US.
“Stocks and crypto together lost $2 trillion in value today,” Sidharth Sogani, founder and CEO of crypto research firm CREBACO told Moneycontrol.
Sogani added that while there won’t be any direct impact on Indian crypto investors, retail investors wanting use foreign exchanges to buy crypto tokens with fiat currency face a challenge.
Sathvik Vishwanath, co-founder and CEO of crypto exchange Unocoin, said that Indian exchanges don’t have much exposure to SVB or Silvergate.
“Given that crypto prices are global and does get impacted, investors in India too will lose a part of their token value. It’s a bad time for anyone to trade. So not much activity has been seen and investors are holding their tokens for the time being,” he said.
But being global in nature also means that token price crash has been hedged to some extent, he said.
Vishwanath added, “If crypto tokens were only restricted to the US, the fall would have been of around 30-40 percent. Since it’s global, it has so far fallen by 5-9 percent.”
Parth Chaturvedi, Crypto Ecosystem Lead, CoinSwitch told Moneycontrol, “There have been a lot of triggers going on lately starting with the Silvergate fiasco. Not much positive news from the US either in terms of regulations, which caused selling pressure on the market leading to token price crashes.”
What went wrong?
Over the last couple of weeks, first Silvergate had a meltdown when it said that there would be a delay in filing its 10-K report, an annual financial performance report for publicly traded companies, citing extended questioning from auditors. This issue ultimately led to the bank announcing shutting down of operations.
Meanwhile on March 8, SVB’s parent SVB Financial Group informed the market that it sold about $21 billion of securities from its portfolio, due to which it will have an after-tax loss of $1.8 billion in the first quarter. This triggered a massive sell-off of its shares on Wall Street triggering panic, leading to its stock plunge by over 60 percent by March 10.
SVB though remains a trusted bank for startup founders and investors across sectors, the market panic led to investors telling their portfolio companies in the US to pull out their funds from the bank for the time being.
According to an AMBCrypto report, Crypto-focused venture capital investors asked their portfolio companies to withdraw funds from SVB as it struggled to reassure its clients.
Other sectors like Software-as-a-Service (SaaS) and including many Indian SaaS players saw a similar advice coming from their investors too.