The Weekly Pen: Valley Volatility & The Road for Redemption

The weekly Pen from the Pen team is back this 10th week of the year 2023, but this week has certainly not scored score 10 on the scale of better than bad news. Post FTX-collapse a new elephant has entered the room. Bank of the Valley for tech pioneers and the primary deposit bank for storing funded capital has now after barely 4 decades, collapsed and with it taken an entire market down with it, creating a continuous contagion. Meanwhile, Biden is out with the plow, taxing the rich and in particular the players in crypto. The Pen has throughout this winter advocated for a road towards redemption and seems that road has taken a turn and put us all on a de-route, hopefully not another shortcut, but a path for the greater good. All this, and a bit of inflation (ironically, when the market is deflating) in this week’s weekly pen.

AMAZONIAN NFT#

Amazon may be interested in using non-fungible tokens (NFTs) to create a marketplace for tokenized real-world assets. The company has posted a job listing for a blockchain expert with NFT and cryptocurrency experience and has filed patents related to blockchain and smart contract technology.

THE INDIA-U.S. AFFAIR#

India and the United States have signed an agreement to cooperate in the field of semiconductors. The agreement aims to strengthen collaboration in areas such as research, design, and manufacturing of chips, which could help alleviate the global semiconductor shortage. India has set a target of achieving $55 billion in chip exports by 2030.

THE FORMER "SACHSER" SCANDAL SENTENCE#

Former Goldman Sachs banker Tim Leissner has been sentenced to 10 years in prison for his role in the 1MDB corruption scandal involving the misappropriation of billions of dollars from a Malaysian government investment fund. Leissner pleaded guilty to charges including conspiracy to commit money laundering and violating the Foreign Corrupt Practices Act.

ABANDONS SHIP ON "BUYING THE DIP"#

Retail investors are abandoning the "buy the dip" strategy and turning to higher-yielding bonds, which could have negative implications for the stock market. The recent sell-off in technology stocks and concerns about inflation have led investors to seek safer investments.

AIRBIT CLUB OF GUILT#

Executives of AirBit Club have pleaded guilty to fraud in a $100 million cryptocurrency Ponzi scheme, highlighting the risks of investing in cryptocurrency and the need for increased regulation in the industry. The Department of Justice has warned investors to be cautious and thoroughly research investment opportunities before investing in cryptocurrency.

THE DIRTY LITTLE SECRET#

A survey shows that almost 60% of institutional investors have used Reddit for investment decisions. The platform has become a source of information for investors, but some experts warn against relying too heavily on online forums for investment advice.

ARK OF ATROCITY#

Cathie Wood's Ark Innovation ETF has earned over $300 million in fees, despite experiencing recent losses. The ETF's success has made Wood a prominent investor, but some warn that its high fees and concentrated portfolio pose risks for investors.

BIDEN TAKING A BITE OF THE BUDGET#

The Biden administration's proposed budget aims to cut the deficit by $3 trillion over the next decade by implementing a 25% minimum tax rate on the richest Americans. The budget proposal includes investments in infrastructure, education, healthcare, and climate change initiatives. However, the proposal is expected to face opposition from Republicans and some Democrats.

JOBLESS CLAIMS POST CHRISTMAS#

The number of jobless claims has risen to 211,000, the highest level since Christmas, with New York being blamed for the increase due to a backlog in processing claims and an increase in fraudulent claims.

BIDEN'S CRYPTO CONTAGION#

President Biden's proposed budget includes a provision that could require cryptocurrency investors to report all transactions worth over $10,000 to the IRS, which could close a tax loophole for them.

U.S. TRADE DEFICIT#

The U.S. trade deficit in January barely increased, which is a positive sign for the country as it puts the U.S. on track to break a three-year streak of record increases. The increase in imports was smaller than expected due to supply chain disruptions caused by the pandemic.

PETER THIEL'S FUND ADVISED FOUNDERS TO GRAB FUNDS#

Peter Thiel's Founders Fund has reportedly advised its portfolio companies to withdraw their money from Silicon Valley Bank (SVB), citing concerns over the bank's relationships with Chinese companies. SVB has been a popular choice among venture-backed startups, particularly in the technology sector, but the move comes amid increasing tensions between the U.S. and China over data security concerns. SVB has stated that it complies with all regulatory requirements and has rigorous security measures in place.

CREDIT SUISSE ON THE BRINK OF SQUEEZE#

Credit Suisse has delayed the publication of its annual report after being contacted by the US Securities and Exchange Commission (SEC) regarding its supply chain finance funds. The bank has faced scrutiny over its handling of the collapse of supply chain finance firm Greensill, which left investors nursing losses. Shares in the bank fell by more than 3% on the news of the delay.

THE INNER CIRCLE AT SEC#

Only six cryptocurrency companies, including Coinbase and BitGo, have managed to register with the US Securities and Exchange Commission (SEC) so far due to the expensive and time-consuming process. This registration allows them to offer products and services to institutional investors that would otherwise be off-limits.

BINANCE POSITIVE POPULARITY#

Binance continues to gain popularity, despite increased regulatory scrutiny, especially after Sam Bankman-Fried, the CEO of FTX, withdrew his name from consideration for the head of the US Commodity Futures Trading Commission (CFTC). This has resulted in an increased market share for Binance, despite regulatory warnings and restrictions.

THE WHALES#

Large amounts of Bitcoin, Ethereum, XRP, and Polygon were moved by whales recently. The funds were transferred to exchanges, indicating possible selling or trading activity. The movements have led to speculation about market volatility and the future of cryptocurrencies.

CIRCLE EXPOSED#

Stablecoin firm Circle, which issues the USDC stablecoin, has revealed a $3.3 billion exposure to Silicon Valley Bank, which acts as a custodian for the company. This disclosure is notable as it shows how interlinked the cryptocurrency ecosystem is with the traditional banking system, and how risks in one sector can spill over into another. Circle stated that it has a cash balance of over $22 billion to support USDC in circulation and will continue to diversify its banking relationships.

ONE'S TRASH, ANOTHER'S TREASURE#

Short-sellers have made a profit of around $600 million in just one day after the shares of Silicon Valley Bank (SVB) fell by 20% due to revelations that a leading US fintech firm, Circle, had exposed its $3.3 billion in reserve funds to the bank. The exposure has prompted concerns about the bank's stability and its potential impact on the stablecoin ecosystem, as Circle's USDC stablecoin is reportedly used by 95% of the companies in the industry.

USDC PEG BROKEN#

Stablecoin USDC broke its peg to the US dollar after its issuer, Circle, revealed that it has $3.3 billion in exposure to troubled bank Silicon Valley Bank. This caused concerns among investors who feared that the situation could affect the stability of the stablecoin.

CIRCLE GOT IT COVERED#

Stablecoin issuer Circle said it would use its balance sheet to cover any shortfall in reserves for its USD Coin (USDC) after revealing a $3.3 billion exposure to troubled bank Silicon Valley Bank (SVB). The announcement sparked a rally in USDC's price, which had dropped below its $1 peg. Circle said it had initiated "several steps to address the situation" and that it remained "fully committed to ensuring that USDC is fully backed at all times." The company also said it was diversifying its banking relationships.

THE BANK THAT BROKE#

Much of what has been covered in this week's weekly pen was based on the recent collapse of Silicon Valley Bank (SVB). In recent times venture capitalist has urged their portfolio companies to almost overnight going to profitability. Whether this has been the true cause of SVB's sudden bank run or something entirely different, it has certainly left a trail of thoughts on what's next for the future of venture financing. Here's a timeline coverage of the 48 hours of horror.

- Till We Yield Again

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