Decentral Block Post

The United States Justice Department is reportedly investigating the collapse of the TerraClassicUSD (USTC) stablecoin which contributed to a $40 billion wipe out in the Terra ecosystem last May.

Two agencies within the department — the Federal Bureau of Investigation (FBI) and Southern District of New York (SDNY) have interrogated former staff at Terraform Labs in recent weeks, according to a Mar. 13 report by the Wall Street Journal (WSJ).

The probe covers similar ground to a lawsuit filed against Terraform Labs and its founder Do Kwon by the U.S. Securities Exchange Commission on Feb. 16, according to people familiar with the matter.

Among topics that investigators have asked about was the relationship between Chai, a South Korean-based payment platform and the Terra blockchain on which USTC operated.

The SEC alleged in its filing alleged that Kwon misled investors into believing that Chai transactions were processed on the Terra blockchain.

The price of Bitcoin (BTC) increased by 14.4% between March 12-13 after it was confirmed that financial regulators had rescued depositors in the failing Silicon Valley Bank (SVB). The intraday high of $24,610 may not have lasted long, but $24,000 represents a 45% increase year-to-date.

On March 12, U.S. Treasury Secretary Janet Yellen, Federal Reserve Chairman Jerome Powell, and Federal Deposit Insurance Corporation (FDIC) Chair Martin Gruenberg issued a joint statement to reassure SVB depositors.

Regulators also announced a systemic risk exception for Signature Bank (SBNY), an intervention designed to compensate depositors for losses incurred by the previous management. Signature Bank was one of the most prominent financial institutions serving the cryptocurrency industry alongside Silvergate Bank, which announced its voluntary liquidation last week.

To avert a larger crisis, the Fed and Treasury devised an emergency program to supplement all deposits at Signature Bank and Silicon Valley Bank with funds from the Fed's emergency lending authority. According to the regulators' joint statement, "no losses will be borne by the taxpayer," although the strategy for deploying Treasury assets is questionable.

The stablecoin USD Coin (USDC) also caused significant turmoil in the cryptocurrency industry after breaking below its 1:1 peg with the U.S. dollar on March 10. The fear grew after the issuing management company Circle confirmed that $3.3 billion in reserves were held at Silicon Valley Bank.

Three banks, Silvergate, Silicon Valley Bank and Signature collapsed within a span of a few days. That increased demand for United States government bonds, which sent the yield on the 2-year Treasury tumbling to 4.06%, a fall of 100 basis points since March 8.

This was the largest 3-day decline since Oct. 22, 1987, following the stock market crash, when the yield fell 117 points.

Although the Federal Reserve announced the formation of a $25 billion Bank Term Funding Program to support businesses and households, the regional banks are taking it on their chin on March 13. This shows that equities traders remain nervous.

However, among all the mayhem, it is an encouraging sign to see Bitcoin (BTC) lead the cryptocurrency recovery from the front. Bitcoin climbed back above $24,000 on March 13, covering a large distance from the $19,549 local low hit on March 10.

Could Bitcoin and the major altcoins sustain their short-term bullish momentum? Let’s study the charts to find out.