The last several days in the financial markets have been tense, particularly for those businesses dependent on Silicon Valley Bank (SVB). Yesterday’s intervention by US regulators to protect the bank’s depositors has provided a bit of short-term relief. But this event, along with the failures of Silvergate and Signature Bank, are leaving many unanswered questions regarding the stability of the US banking system.   

While there will continue to be much debate over the future of the US banking system, we want to take the opportunity to clarify our relationship to the impacted banks and highlight how the processes and systems we have in place mitigate exposure to these types of events. 

First, it is worth noting our past and current exposure to the impacted institutions. We've never had a banking relationship with Silicon Valley Bank but have used Silvergate and Signature in the past. 

It’s important to point out that none of the funds managed by Hashdex had any losses related to this US banking crisis. We use multiple bank accounts for our funds. In general, given that each Hashdex fund is fully allocated to crypto, the remaining dollar balances in bank accounts are marginal. Our primary use for US bank accounts is to receive subscriptions, pay redemptions, and settle trades. 

In November, out of an abundance of caution, we stopped using Silvergate. Neither our funds nor Hashdex had any balance with Silvergate at the time of the FDIC's intervention. And early this month, before the FDIC’s intervention in Signature Bank, we stopped using this institution. We’ve always used multiple banks to serve the USD on/off ramp to/from the crypto ecosystem, and this will continue to be our way to operate and mitigate this kind of risk.

Hashdex has avoided direct impact to our investors from events like these by pursuing operational excellence and obsessing over risk management. We had zero exposure to the FTX disaster, Genesis Global Capital, and several of the other centralized industry failures in 2022 because we had the processes in place to ensure that any third party we do business with—whether a custodian, exchange, or other service provider—holds themselves to the same high standards that we do. And we also understand that not every crypto asset is worthy of investment, a philosophy that helped us ensure our investors were not exposed to Terra/LUNA in the spring of last year. 

These are difficult times for many, and uncertainty around the stability of financial institutions is only compounding economic anxieties. However, we continue to believe that bitcoin and many other crypto assets were built for times like this and that recent events serve as an effective reminder of why the world needs a truly decentralized, borderless, currency that is not controlled by intermediaries.  

Today, crypto fundamentals remain as strong as ever. At this writing, BTC is up over 17% in the few days since we learned of the deteriorating conditions at these banks and is off to a very strong 2023 relative to other risk assets. In other words, crypto isn’t going anywhere. But regardless of short-term events or price swings, we continue to believe that a longer-term recovery in crypto assets is taking shape and regulated investment funds remain the most secure and simple way for investors to access the crypto ecosystem. 

 

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