Circle's "USDC" stablecoin depegs from the U.S. Dollar, after the SVB collapse. Probably indicative of a liquidation of Crypto/stablecoin assets; no body knows the ratio value of its Collateralized backing. Which points to an entangled mess of IOU's. Just like 2008.

 

If the Federal Reserve ends up bailing out SVB Financial Group, the Central Bank, which I don't think they will offer a bail out, would essentially be bailing out the crypto markets .  In reality crypto should be allowed to deleverage after its 2020 excesses (pandemic stimulus and Tweets of manipulation).   The  'internet valued' USD crypto coin, known as USDC which was pegged to the U.S. Dollar.  Created by what appears to be a digital database called Circle, known in Crypto speak as a Blockchain, which is, yes, basically a glorified database.  Depegged from the U.S. Dollar on news of the SVB wipeout and subsequent liquidation of the Silicon Valley Bank , when Coinbase, the mega Crypto exchange that was already on shaky ground, despite being somewhat underwritten by Blackrock, is connected to the Circle's stablecoin platform, has revealed that it had parked over $3 Billion in assets at SVB.   

Above Chart shows the market cap of USDC Stablecoin collapse on the SVB insolvency.  The questions are; how much of Crypto and its so-called eco systems are tired to stablecoins that rely on their dollar/bond colleterial from other financial institutions?  And what is the actual 1:1 worth?  Particularly with the Crypto/Stablecoin 'peg' which has been attached to mostly collateralized assets, have become volatile on the market's confusion with inflation and looming stagflation.  It smells eerily similarly to 2008 when the mortgage backed security market became an entangled mess of IOU's. 

Note, this amusing article from Forbes in May 2022, when TerraUSD stablecoin collapsed, praising USDC.  Excerpt as follows:  

"The market is clearly showing us that collateralized stablecoins are the future,” says Andrew Pesco, head of investment management at Domain Money.

Collateralized stablecoins like USD Coin (USDC) have proven to be resilient this week. Despite the messy week, USDC is still trading at $1, and it even experienced a high of $1.13. Another competitor, DAI, also traded above $1 on Thursday." 

No, you cannot blame the Federal Reserve interest rates for SVB's collapse.  One way or the other, whether the Fed slams on the brakes to tackle inflation or the market will by natural design.  And if it is  the market, the affects would be far more brutal.

All eyes on the Crypto exchange/Blockchain shortfalls and how these companies will raise capital with little or no colleterial.