🏦 Crypto's banking bind

Friday, March 3, 2023 by Snacks
Searching for a silver lining (Jakub Porzycki/Getty Images)

Searching for a silver lining (Jakub Porzycki/Getty Images)

Searching for a silver lining (Jakub Porzycki/Getty Images)

Searching for a silver lining (Jakub Porzycki/Getty Images)

Yesterday’s Market Moves
Dow Jones
33,004 (+1.05%)
S&P 500
3,981 (+0.76%)
11,463 (+0.73%)
$23,462 (-0.72%)

Hey Snackers,

The Upside Down is coming to the town of the Underground: Netflix announced that it’s bringing a “Stranger Things” spinoff play to London’s West End theater district.

US stocks rebounded yesterday, led by the Dow, after Atlanta Fed Reserve President Bostic said he “firmly” supports sticking with quarter-point rate hikes.


1. Crypto mega bank Silvergate suggests it might not survive, leaving crypto companies scrambling

When the 800-pound gorilla gets sick… A California bank that's played a vital role in the crypto industry's growth issued a stark warning on Wednesday: its days may be numbered. Publicly traded Silvergate said it wouldn’t be able to file its annual report with the SEC on time because its financial position has deteriorated significantly since last month. Now it's "evaluating" whether it can continue operating. The fallout was swift:

  • Not so silver-great: The bank's stock plunged nearly 60% yesterday, hitting a record low as anxious investors shed shares.

  • Won't silver-wait: Coinbase, Galaxy Digital, and crypto-services biz Paxos all said they're taking their business elsewhere.

Silver lining turns gray… Silvergate was the crypto bank because it was one of the few US banks willing to go all in on crypto, offering companies a bridge between digital assets and dollars. Before that, it was a relatively small community lender with three SoCal branches and less than $1B in assets. Fast forward to last year: Silvergate held $16B in deposits, 90% of which were crypto-related. But things took a turn after FTX's fall (FTX had accounts at the bank). Silvergate reported a $1B loss last quarter, and it’s reportedly facing a Department of Justice fraud investigation.


Crypto risks becoming an island… if it loses its banking bridge to the financial mainland. Crypto promises a system separate from traditional finance (aka: TradFi), but it still heavily relies on regulated banking partners to get US dollars in and out of the system. Without partners like Silvergate, crypto's growth path looks narrower. Even Coinbase's substitute for Silvergate, Signature Bank, moved to reduce its crypto exposure last year. That, combined with a recent cautionary note from regulators aimed at crypto-curious banks, could pose a real problem.


2. Instacart’s reportedly thriving ahead of an anticipated IPO, but growth may be more in ads than avos

Emergency hummus delivery… for when you just need to buy the dip. Instacart is America’s grocery-delivery leader, followed by DoorDash and Uber Eats. Unlike its rivals, Instacart is private, so it doesn’t publicly report its earnings. But ahead of its anticipated IPO this year, The Wall Street Journal got its hands on some numbers.

  • Full carts: Instacart’s quarterly sales jumped 50% from last year, while profit surged 80%, according to WSJ’s “people familiar with the matter” (#PFWTM).

  • Clear aisles: Instacart’s sales jumped 39% to $2.5B last year, even as order volume growth slowed from lockdown-era highs.

  • Not just groceries: Instacart has delivery partnerships with retailers like Best Buy, Sephora, Staples, and Walgreens.

It’s less about avocados… and more about ads. While the grocery-ordering boom slowed from its pandemic peak, Instacart prospered from its push into advertising. Think: in-app ads for Pepsi, Bud Light, and Cheerios. For example, you search “chicken” on Instacart and get a sponsored listing for Applegate chicken strips at the top of your page. Instacart’s ad products reportedly generate a 15%+ sales boost for brands on the platform.

  • Secret ingredient? Instacart is one of the “sneaky advertisers” like Uber, Kroger, and CVS, which have leveraged their trove of customer data to sell targeted ads.

  • Silent come-up: When it comes to digital marketing, the focus has been on ad-reliant tech titans like Google and Meta. That could be changing….


It pays to be the destination… Unlike Facebook, Google, and Twitter, Instacart is a shopping destination. You might scroll past a Pepsi ad on Instagram, but you’re less likely to scroll past a Pepsi ad on Instacart that appears after you searched “soda.” People come to platforms like Instacart, Amazon, and Kroger with the intention of shopping. That makes ad space on these platforms highly valuable for marketers.


3. The Crypto Catch-Up…

🪙 Coins… Coinbase said it would suspend trading of Binance-branded stablecoin BUSD (formerly the third-largest stable). Last month regulators ordered BUSD issuer Paxos to stop minting the coin.

📸 Flashy… Yuga Labs, the crypto biz behind Bored Apes, said it's launching a new NFT collection on bitcoin. The 300 "TwelveFold" NFTs will join a growing number of digital assets tied to bitcoin’s blockchain (aka: ordinals).

💰 Costly… Crypto conglomerate DCG said it lost $1.1B last year, pointing a finger at declining crypto prices. Also: DCG’s crypto lender, Genesis, declared bankruptcy in January.

What else we’re Snackin’

  • Budmiser: Bud maker AB InBev said quarterly sales were down as year-end price hikes took their toll on beer drinkers. Now it’s shifting focus to cost-conscious consumers who opt for at-home brews over bar booze.

  • AppGPT: Apple blocked an update for an email app that contained new AI-powered tools, asking the developer to set a 17+ age restriction. It suggests Apple’s concerned about AI’s potential harm and broad use.

  • Malled: Nordstrom and Macy’s reported lower sales and profits for the holiday quarter as shoppers cut back on department-store spending. While the retailers beat earnings expectations, forecasts were choppy.

  • Ping: Salesforce shares popped 12% yesterday after the enterprise cloud-software titan (which owns Slack) reported a surprisingly strong quarter, an upbeat annual profit forecast, and a $20B buyback plan.

  • Anticlimax: Tesla shares have fallen since its investor day on Wednesday, when it didn't discuss rumored next-gen models, disappointing some investors. Still, Elon said the biz plans to halve production costs.

Snack Fact of the Day

The sun is so big it could contain about 1.3M Earths


  • Fed Gov. Michelle Bowman speaks

Authors of this Snacks own bitcoin and shares of: AB InBev, Apple, Amazon, CVS, Google, Tesla, and Uber

ID: 2769906

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