There was a very curious crypto pump after the Silvergate/SVB/Signature Bank saga. BTC and ETH went up ~15% on Monday. The prices have since retreated but it was really interesting as the stock market tanked after the bank closures. I have a conspiracy theory for why that happened and it’s quite plausible. Basically, what we were seeing was not a crypto pump but instead a stablecoin (USDC/BUSD) dump.
After the SEN and SIGNET shuttered as part of the Silvergate/Signature Bank closures, it made the crypto-fiat ramp a lot more complicated and slower. Before, if you have an account on Signet and Binance, you can move your money from and to Binance instantly. In fact, the money can be moved among all the entities instantly on Signet. As shown on the tweet above, many entities could move money to one another instantly including Binance, Huobi, OK Coin, Alameda Research, FTX, Paxos and Circle. Say you are a crypto hedge fund and you have an account on Signet, you can move your USD to the offshore exchange instantly, do some trades and move it back to USD in the USA. Binance can mint and redeem BUSD instantly and can move money from offshore to the USA instantly. All the entities on the Signet can also mint and redeem USDC instantly.
Now Signet is closed. How does Binance redeem their BUSD? Ask Paxos to send billions over from the USA to an offshore bank account Binance controls? The offshore USDC holders will also wonder how they can redeem a large amount of their USDC holdings. What could they do about this? They converted their BUSD/USDC into crypto instead. Hence the crypto pump. CZ actually announced this motion in a tweet as shown below:
But instead of calling it a crypto pump, I think it should be called a BUSD/USDC dump. With the loss of Signet and SEN, the fate of crypto is becoming complicated as it’s now a lot more complicated and slower to convert your crypto back to fiat and is the crypto money real money? I honestly don’t know after the events over the past week.