How did Silvergate Bank Collapse?
Silvergate Bank was a thriving institution in the world of cryptocurrencies, but it is now a cautionary tale for those seeking to enter the market. In this article, we’ll take a closer look at the rise and fall of Silvergate Bank, and explore the factors that led to its ultimate collapse.
Silvergate Bank was founded in 1988 as a California based community bank, but in 2014, the bank entered the cryptocurrency market, offering accounts to companies providing services in the Bitcoin space. This move led to the creation of the SEN (Silvergate Exchange Network), a platform that allowed for seamless payment transfers between Silvergate customers, operating 24/7. The bank grew its customer base during the crypto winter of 2018 and brought in-house software engineers to add more functionalities to the platform. The SEN was a fee generator for Silvergate and provided a significant benefit to its clients, while also serving as an anchor for its zero-cost deposit base.
The first sign of trouble for Silvergate Bank came with the collapse of FTX in 2022. This triggered a devastating bank run on Silvergate, with clients withdrawing a staggering $8.1 billion from the bank. The bank had to sell off assets, including bonds, at a lower price than their marked value on the balance sheet, thus incurring significant losses and impairing capital. The bank’s management had structured its balance sheet to withstand a 70% drawdown on deposits and kept cash reserves that exceeded all remaining deposits. However, at many levels, this wasn’t enough.
The bank’s management team took measures to ensure liquidity and accommodate deposit inflows and outflows. Silvergate adjusted its expenses, reviewed its product offerings and customer relationships, and implemented cost-saving measures like reducing its workforce by approximately 40%. They tried to fight back with decisive actions to mitigate the losses and for a moment seemed to regain control of the situation.
However, news surfaced of the Justice Department taking an interest in Silvergate and questioning FTX and Alameda transactions that took place on the SEN. While it is unclear if Silvergate did anything wrong, having the Feds start poking around and asking questions is certainly a headache and distraction that a troubled bank didn’t need.
To make matters worse, political pressure on the bank has increased to deafening levels, which has destroyed what little reputation and confidence the bank had left. The pressure grew so intense that the Federal Home Loan Bank of San Francisco demanded the repayment of the $4.3 billion loan that they had provided when the problems started. This loan recall is already stirring up controversy, with some questioning whether it was simply political pressure and cherry-picking rather than a neutral regulatory decision.
The final nail in the coffin was the bank’s delayed annual report, caused by the need to reevaluate the losses incurred and its ability to continue as a going concern. This led to its clients losing confidence in the bank and stopping the use of its SEN, effectively killing it. Without its SEN, the very reason for the bank’s existence was mostly over. In a matter of days, the bank went from delaying the annual filing to liquidation.
While it is true that regulators, politicians, and the macro scenario contributed to the bank’s woes, the management team had a role to play as well. First, they directed the bank’s funding toward the cryptocurrency business. In hindsight, they could have diversified the sources of funding or been more conservative in the deployment of funds. On the asset side, they held bonds that went down with rising interest rates, and on the funding side, they had clients dealing in an asset class that was tremendously sensitive to interest rates.
How does the failure of Silvergate Bank impact the Cryptocurrency Industry?
The collapse of Silvergate Bank has had far-reaching implications for the crypto industry. One immediate consequence is the disruption of essential banking services for numerous crypto companies. Silvergate Bank played a crucial role in providing banking solutions, such as fiat currency accounts and digital asset custody, which are now in jeopardy. As a result, crypto businesses are grappling with financial instability and uncertainty as they struggle to find reliable banking partners to support their operations.
Another significant impact of Silvergate Bank’s collapse is the erosion of trust and confidence within the crypto industry. The downfall of a well-established institution like Silvergate Bank has raised concerns among investors and businesses. They may become more cautious and hesitant to engage in crypto-related activities, fearing similar failures in the future. This loss of trust poses a challenge to the growth and adoption of cryptocurrencies, making it harder for the industry to gain broader acceptance from traditional financial institutions and the general public.
Furthermore, the collapse of Silvergate Bank may trigger increased regulatory scrutiny on the crypto industry. Regulators could interpret this event as evidence of the risks associated with cryptocurrencies and their ecosystem. In response, they may impose stricter regulations and compliance measures to ensure the stability and integrity of the financial system. While these efforts aim to safeguard investors and mitigate risks, they could also impede innovation and impede the growth of the crypto industry.
In the aftermath of Silvergate Bank’s collapse, crypto companies are actively seeking alternative banking solutions. They are exploring partnerships with other financial institutions that are more crypto-friendly or turning to decentralized financial (DeFi) platforms that offer banking-like services without relying on traditional banks. However, while these alternatives can provide temporary relief, they may not fully replicate the comprehensive services offered by established banks like Silvergate Bank.
Moreover, the collapse of a significant financial institution in the crypto industry has the potential to induce market volatility and affect investor sentiment. The uncertainty surrounding the stability of the banking system can trigger sell-offs and price fluctuations in cryptocurrencies. This volatility could discourage new investors from entering the market and dampen overall market growth.
In the end, the collapse of Silvergate Bank serves as a cautionary tale about the importance of proper risk management and oversight in the banking industry. While the bank’s rapid expansion and lucrative cryptocurrency business may have seemed like a recipe for success, it ultimately proved to be its downfall when market conditions changed. As regulators and industry leaders continue to grapple with the fast-evolving world of digital assets, it’s likely that more lessons will be learned along the way. However, with careful attention to risk management and a willingness to adapt to changing market conditions, banks and other financial institutions can hopefully avoid a similar fate.
It seems only yesterday when headlines of sports trading cards selling for millions of dollars spotlighted the lucrative world of collectible cards.
To recap the highest flying sales:
- A 1952 Topps SGC 9.5 Mickey Mantle card sold for $12.6 million
- A T206 SGC 2 Honus Wagner sold for $7.25 million
- The LeBron James 2003-04 Rookie Patch Auto sold for $5.2 million.
- Patrick Mahomes 2017 Rookie Auto BGS 8.5 sold for $4.3 million.
- Luka Doncic 1:1 Logoman Auto sold for $4.6 million
And the list goes on, often to the incredulity of the average person still digesting the idea that even classical art can fetch multi-million dollar price tags.
Throw NFTs, these intangible digital collectibles, into the mix, and it seems people’s incredulity grows to almost shocked disbelief.
NFT sports cards were inevitable– attach the high value placed on limited edition collectible cards to a 24/7/365 digital marketplace, and you’ve got a powerful combination.
The following guide explores the ins and outs of NFT sports cards.
NFT Sports Cards 101: A Quick Summary of NFTs
To best understand how NFT sports cards work, it’s essential to firmly grasp the NFT concept.
A non-fungible token is a cryptocurrency that is unlike any other– hence its non-fungibility.
For most practical purposes, one bitcoin will always equal one bitcoin, in the same way, one quarter will always equal one quarter.
However, let’s say we have two houses with identical floorplans– but one is on the beach, and the other is in a regular suburb. In most markets, the beachfront house might be worth triple or even ten times the amount of its less-breezy twin.
Similarly, the NFT token standard enables tokens to hold unique characteristics– which are priced accordingly by the market.
The holder of the NFT owns what is essentially the deed to the digital trading card and can sell it whenever.
In more technical terms, the NFT owner holds the token in a cryptocurrency wallet; their private key is what signals to the blockchain that they are the owner of the wallet and its contents, enabling them to trade as they please.
There are no physical tokens or coins that represent the NFT– it’s all digital, and your private key is what communicates your ownership of the NFT.
Exploring the NFT Sports Card World
Today’s most popular NFT sports card platforms are essentially the issuers of a specific collection.
For example, NBA Top Shot is the officially licensed platform of NBA collectibles. NBA Top Shot project took the cryptocurrency world by storm when Dapper Labs launched it in October 2020, introducing many of its crypto-savvy collectors to the future of NFTs.
Dapper Labs is also known for its viral CryptoKitties project in 2017, seeing several CryptoKitties reach six-figure sales.
In addition to NBA Top Shot, Dapper Labs also has NFL All Day and UFC Strike.
In just a few short months, NBA Top Shot attracted over $123 million in sales. In 2022, NBA Top Shot Labs reached over $1.03 billion in secondary market trades.
Dapper Labs takes a 5% royalty fee on secondary NFT sales of its marketplace; so, in theory, Dapper Labs made about $50,000,000 from its users trading its NFTs with each other.
In contrast to physical sports cards, NFT sports cards are able to include additional rarity features; NBA Top Shot uses different tiers like Legendary, Rare, Fandom, and Common.
NBA Top Shot introduced the most polished NFT sports experience in 2020, paving the road for several new NFT sports card marketplaces today.
SoRare is a competing NFT marketplace and issuer that initially started with football (of the round ball sort) NFTs, and has expanded to MBA and MLB NFTs.
However, in addition to purely holding SoRare cards for collection’s sake, collectors can play in twice-weekly global competitions or against friends in private leagues. Using the cards for their collections, players can submit either five-player lineups (for football & NBA) or a seven-player lineup (MLB) in free competitions.
SoRare players can also earn rewards such as digital player cards, merchandise, match tickets, ETH, or even meeting their star athletes– all based on their squad’s real-life performance– similar to a fantasy league.
NFT Sports Cards: Considerations
Chances are that one top question in your head comes from this line of logic: well, if seemingly anyone can launch an NFT, wouldn’t the market just become supersaturated with NFT sports cards, basically commoditizing the asset class?
Correct. However, this isn’t much different from how real-life companies can start pumping out specific trading cards, provided they have adequate licensing and legal agreements with the organizations.
Similarly, sports organizations tend to sign non-exclusive licensing agreements with NFT platforms– similar to how SoRare and NBA Top Shot are competing companies offering NBA NFTs. However, SoRare offers a gaming aspect, whereas NBA Top Shot seems to be strictly collection-oriented.
We can expect to see more NFT sports card marketplaces and issuers arise with different functionalities.
Autograph, for example, is a platform that enables famous athletes and celebrities to turn their real-life experiences into NFTs, giving them a direct link to add personal touches to the digital collectibles distributed to fans.
Rather than a simple static image or . GIF, Autograph NFTs are typically customized high-graphic digital representations, such as interactive posters, digital action figures of iconic game highlights, and more.
The Autograph team counts a star-studded array of celebrity athlete partners, like Tom Brady, Simone Biles, Tiger Woods, Derek Jeter, Wayne Gretzky, and Tony Hawk.
However, NFTs come with additional considerations their physical counterparts don’t.
For one, the underlying blockchain adds another distinctive category type. While the bulk of NFT sports cards (in terms of market share, volume, and popularity) are on Ethereum’s blockchain, there are competitors emerging on blockchains like Solana, Polygon, Flow, and even Cardano.
Final Thoughts: The Future of NFT Sports Cards
Bear or bull market, the underlying value proposition of NFT sports cards remains the same– collect digital assets representing your favorite athletes similar to how you’d collect physical cards.
With a few billion dollars in primary and secondary volume, NFT sports cards are a smaller yet still dominant representation of NFT’s potential.
It’s not a stretch to assume we’re in the early innings of how far NFT sports cards can go; platforms like NBA Top Shot, SoRare, and Autograph have raised and are implementing over a billion dollars of cumulative funding to build their NFT offering
However, potential NFT sports cards holders should be mindful their digital holdings come with more nuanced responsibilities, such as protecting your holdings from hackers (and yourself) with adequate cryptocurrency wallet security and digital hygiene– as well as the underlying risks of the very risky cryptocurrency world.
Disney, one of the world’s largest mass media producers, entered the world of non-fungible tokens in 2021 by creating NFT collections from their iconic characters.
Disney NFTs, which include the company’s intellectual property and acquired franchises such as The Simpson, are showcased on VeVe —a marketplace that licenses and showcases NFTs from some of the most important companies from different industries.
Disney NFT Collections on VeVe
On November 2021, Disney launched their first NFT collection: the “Disney Golden Moments NFTs,” in celebration of Disney Day. The collection, as the name suggests, comprises some of the most popular moments from iconic characters in the company’s history, showcasing Elsa from Frozen, Iron Man, and at the top of the collection is Walt Disney holding hands with Mickey Mouse.
Disney NFTs sold out almost immediately at launch, like most collections from VeVe’s marketplace, considering they are from some of the world’s most important companies in mass media. However, Disney adopted a “Blind box” method on dorp day, requiring buyers to open a box to see their purchase. Most of the NFTs within the collection were priced at $60, with the value of some of these NFTs reaching $2000.
VeVe features three types of rareness for Disney NFTs. As part of the Golden Moments collection, there were 4,333 ultra-rare statues of Walt Disney holding Micky Mouse’s hand, each with a list price of 333 Gems ($333). Each purchase of a Partners Statue grants the customer a twelve-month subscription to Disney+ courtesy of VeVe.
On VeVe, we can find the full catalog of Disney’s NFTs, including collections from Star Wars, Cars, and Toy Story to single NFTs characters from Marvel, Alice in Wonderland, and The Simpsons.
On April 8, 2023, Disney launched the Disneyland Resort Posters collection, which celebrates the original artwork used to create Disneyland resort posters from the early days of the Tomorrowland area.
Disney’s Start Wars NFT Collection
The Star Wars NFT collection is one of Disney’s best-selling NFT collections on VeVe. Popular characters like C3PO and R2-D2 were the first to be showcased on the platform. Darth Vader soon followed with three different poses, but one of them is Ultra Rare, and it’s Vader doing an animated Force choke.
Disney acquired Pixar in 2006, and with the Pixar family having some of the world’s most beloved animated characters in history, Disney made sure to add it to its Golden Moments NFT collection on VeVe. Similar to other NFTs, they were priced at $60, with their value skyrocketing 400% on secondary marketplaces.
On March 2022, Disney decided to double down on Pixar characters with the PIXAR PALS series, which comprises collections with over 50,000 NFTs combined that sold out immediately, auctioned in blind boxes at $60 each.
The PIXAR PALS series generated an estimated $3.3 million in revenue. Wall-E, Sheriff Woody, Edna Mode, and more iconic characters from Pixar were showcased on VeVe as hand-painted digital art.
One of them is the Woody collection “Hey Howdy Hey!” consisting of 13,999 NFTs, priced at $60 with a Common rarity, with Woody rendered as a 3D NFT.
Disney launched its Marvel NFT collection as a comic series released weekly by VeVe, each with their own level of rarity: Common for the original cover and Uncommon for black and white versions of the original comics.
Marvel Premiere #21 featuring Iron Fist
Marvel NFTs aren’t just covers of the original comic books —the comics can be read by browsing the pages on PC or iOS/Android devices.
Disney Mickey Mouse NFT Collection – Mr. Mouse
Naturally, Disney’s appearance in the NFT realm wouldn’t be complete without its long-time mascot, Mickey Mouse. The Mr. Mouse series dropped on December 24th using the Blind box method.
A total of four series were launched, with Series 4 featuring three collections;
- Hitchin’ A Ride, 3D animated collectibles comprising 2,940 rare NFTs priced at $60
- A Close Call, 1,340 ultra-rare NFTs at $60;
- All Aboard!, 940 secret rare 3D figures with Mickey hoping on a departing train, priced at $60.
Holders of the three series were airdropped a “Mickey’s Signature,” a unique NFT collectible, as a gift.
How to Buy Disney NFTs
To buy a Disney NFT on VeVe, you first need to sign up and install the VeVe app (if you’re using the mobile version). Thereon, you can only buy/sell NFTs using the platform’s currency, Gems, which equals one US dollar. You can buy Gems using Apple Pay or Google Pay. The fees by the credit card provider, bank, or PayPal apply (and unlike cryptocurrency, you cannot sell Gems off-market.)
Secondary market fees on all Disney sales apply; VeVe charges a 6% licensor fee on top of the existing VeVe 2.5% fee for each secondary sale.
Final Thoughts: Future of Disney NFTs
Disney NFTs were some of the biggest news for the NFT ecosystem in 2021. A company that size attracted even more eyes to a flourishing ecosystem that was already seeing an influx of high-profile companies creating their own digital collections.
The mass media giant remained active for the following years after launching their first collection in 2021, all during Bob Iger’s absence, who worked as its CEO for 15 years. However, with the return of Iger on November 2022, Disney could double down on NFTs and Web3 for 2023.
On March 2022, Igor joined Genies, an NFT platform on Dapper Lab’s Flow blockchain. He stated that the Web3 market offers “extraordinary” possibilities for Disney. “When you think about all the copyright and trademarks, characters Disney has, and the NFT possibility, they’re extraordinary, said Iger to the Hollywood Reporter.
NFT airdrops refer to the distribution of an NFT for free to a community or a group of whitelisted individuals. It’s a popular method for NFT projects, artists, and blockchain gaming apps to promote a new NFT collection to the public, draw attention to a new brand, or engage with their communities by handing out rewards.
While NFT airdrops are often free, they usually require users to hold a specific type of NFT to be eligible for the airdrop. This happens when a project announces an upgrade, a sidekick, a special package, etc., that benefits the holder and promotes a new collection as well.
How NFT Airdrops Work
Projects and creators often distribute NFTs by creating a new collection or sidekick by minting the NFTs and sending them to a particular group of wallets. They can also use a portion of the minted supply on later occasions.
Either way, the idea is to promote hype for that new collection, drive public awareness of the brand, or add value to the existing NFT collection. Likewise, early holders can claim a new NFT, and others have the chance to receive a new token by just doing a few tasks and at a much lower cost compared to the minting stage prices.
Creators usually promote NFT airdrops through their websites and social media channels. A particular set of tasks is outlined to claim the airdrop, such as sharing the post or tagging friends on social media, interacting with the community, creating social media posts or blogs about the airdrop.
The most common types of NFT and general airdrops are:
- Holder airdrop: these are the most common airdrops, in which projects send NFTs to wallet addresses holding a specific NFT or cryptocurrency. Generally, the more tokens the user has in their wallet, the more NFTs they receive.
- Standard airdrop: these are limited NFTs in terms of quantity and time. Users are not required to perform any specific task rather than creating an account and connecting their public crypto wallets to the website.
- Exclusive Airdrop: this type of airdrop is a way of rewarding loyal holders who, besides holding the token for an extended period, have attended exclusive IRL events, interacted with the community, and contributed to the collection in some way. Exclusive airdrops are not meant to be confused with bounty airdrops, which are open to everyone to participate.
- Raffle airdrop: rare NFTs distributed to a few selected individuals. In this airdrop, a creator will form groups using users’ crypto wallets and whitelist them before randomly choosing the winners. In order to participate, users typically have to sign up to the airdrop or perform a series of tasks.
Examples of Successful NFT Airdrops
For example, holders of Bored Ape NFTs received a digital vial of mutant serum, which turned their Bored Apes into Mutant Apes: Yuga Lab’s second project. In other words, Bored Apes holders received an NFT airdrop that changed their original NFT.
Mutant Ape #28566. Source: OpenSea
In late April 2022, Chiru Labs announced the launch of Beanz, an airdrop collection of 19,950 NFTs that function as sidekicks to Azuki NFTs. On the day of launch, the highest selling bean sold for 90 ETH, or roughly 250k in that time.
However, the chances of an airdropped NFT becoming highly valuable in the near future are low, unless we’re talking about NFT projects that have a well-established position in the space. The success of a new NFT collection will highly depend on several factors, including utility, rareness, reputation, exclusive benefits, and membership perks in the community, to name a few.
How to Claim an NFT Airdrop
NFT airdrops will have different mechanics depending on the creator, but you’ll need a cryptocurrency wallet that supports the specific blockchain and NFT you want to receive. MetaMask and EVM-compatible wallets are the most popular options in this case. You must either provide your public address to the project or connect your wallet to the project’s claim site.
When you visit the airdrop page, you will likely find a set of tasks and rules to perform and follow to get a chance to claim the NFT airdrop. Other times, you don’t need to do anything as the creator already has your wallet and will sort it together with other addresses.
Where to Find NFT Airdrops?
You can find NFT airdrops by following closely NFT projects on their social media or websites to be as early as possible at the time they announce upcoming airdrops. You can also check out aggregators like CoinMarketCap or NFT news sites that usually provide long lists of airdrops.
Safety Tips Before Participating in Airdrops
Beware of random NFT airdrops coming into your crypto wallet. If you receive an NFT or any other token with no verifiable source, it’s likely a scam. In this case, do not sell, trade, or interact with it.
NFT airdrops are an extension of an already established community, so double-check the airdropped token and see if the source matches with the original creator.
Here are a few rules to follow:
- Only provide your public wallet address to verifiable projects but never your private keys, seed phrase, or personal credentials. If a project is asking you for any of these, it’s a scam.
- Make sure you double-check the project’s legitimacy before connecting your wallet to the website or DApp. Scammers will always copy a project’s marketing content, websites, and landing pages to trick people into believing they are legit. Check the URL and any changes in the website’s direction or name.
- It’s always better to use an empty NFT wallet, as the scammer won’t have anything to steal if you ever fall victim to one.
- Verify that the tasks you need to perform don’t require handing over personal information.
- If the task involves sending money or crypto to a specific wallet, it’s a scam.
- Ignore NFT airdrops sent to your DM – usually scammers or dubious and low-quality NFT projects.
Airdrops are similar to being a regular customer in a grocery store and receiving a special treat for all the years you’ve been buying from them, or getting an offer from supermarkets; buy one and get one for free at a later date.
They are a popular way of engaging with communities, driving brand awareness to Web3/NFT projects, or adding value to existing projects; mostly because they’re easy to carry out, cheap, and allow creators to test the community’s reaction to certain types of projects. Airdrops are often seen a win-win for both sides, as they benefit users with new assets without doing too much in return.