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Silicon Valley Bank’s failure has a lot to do with rising interest rates, but the shock waves of its demise will still be felt in the crypto industry.

Silicon Valley Bank, or SVB, was the bank of choice for 44% of US venture-backed technology companies. But as venture capital dried up during the tech sector downturn, startups have increasingly had to draw on their bank deposits to buy themselves more runway. And that was when SVB ran into capital problems.

As the Federal Reserve continued to raise interest rates, the value of SVB’s government bonds fell.

“SVB at a high level was actually conservative and bought US Treasuries and held them on the books, both long-term and short-term,” Fresco Capital managing partner Stephen Forte said Decrypt.

It would not have been a problem if the bank, already short on capital, had not been forced to realize the loss on the government bonds.

“The narrative on Twitter led to a bank run, and then when you have to sell these Treasuries at a loss, it all comes crashing down,” he said.

After rumors that the bank was looking for a buyer, SVB customers sprung into action 42 billion dollars in withdrawals on Thursday. Friday morning, Nasdaq stopped trading of the bank’s shares (SIVB) and SVB were ordered to cease operations by California State banking regulators.

The Federal Deposit Insurance Corporation, which was named SVB’s receiver, said in a news release that insured depositors with less than $250,000 in SVB accounts will have “full access” to their funds by Monday, March 13. The rest—and it’s a lot, considering SVB had roughly $209 billion in total assets at the end of 2022—will have to wait.

After a decade running three different venture-backed startups, Shipyard CEO Mark Lurie said this is the worst prospect he’s ever seen for raising capital.

“I’ve been doing this since 2012. This has been the toughest environment,” Lurie shared Decrypt on Friday. “Late winter I think the median values ​​were around $35 million. And a few weeks ago it was up to $50 million. I think it’s probably going to go down again.”

Shipyard is the software company behind the decentralized crypto exchange Clipper, which operates on Ethereum, Optimism, Polygon, Moonbeam and Arbitrum. The company itself did not have funds in an account at Silicon Valley Bank, which was abruptly closed by California state banking regulators on Friday.

Lurie’s concern stems from the fact that many of the venture capital funds and liquidity providers that Shipyard and other tech startups rely on were SVB clients.

“Being placed in receivership does not mean that no one will get the money back. It is different than a bankruptcy. It’s not that SVB doesn’t have assets, Lurie said, but there are no clear answers as to how long it will take for customers to get their money. “It’s not like people are going to get pennies on the dollar, but it could be years from now that they get their money back.”

If it sounds like the failure of Silicon Valley Bank, the largest FDIC-insured bank to fail since 2008, is a blow that will rattle the banking and tech sectors at large, rather than just crypto companies, that’s because it is.

However, it hasn’t always seemed that way. On Wednesday, crypto-friendly bank Silvergate was the first to fall, and some lawmakers took the opportunity to blame the crypto industry for banks struggling in the face of rising interest rates.

Senator Elizabeth Warren (D-MA) has been concerned with determining whether Silvergate bears any responsibility for the loss of FTX customer funds since December. She said in a press release that the bank’s involvement with FTX, which was a client, “appears to be a serious failure for [its] responsibility for monitoring and reporting suspicious financial activity carried out by customers.”

On Tuesday, White House press secretary Karine Jean-Pierre got the ball rolling by saying that Silvergate is “the latest company in the cryptocurrency space to experience significant problems” during a press briefing.

The next day, Warren called Silvergate’s failure disappointing but predictable on Twitter. “I warned about Silvergate’s risky, if not illegal, activity — and identified serious due diligence errors,” she wrote. “Now customers need to be made whole and regulators should step up against crypto risk.”

So when SVB started showing signs of trouble, there was already a lot of momentum behind the idea that banks with links to crypto are struggling.

“They can knock some startups that are a little bit into crypto, but they are not a big part of the infrastructure of the crypto market,” said Keyrock CEO Kevin De Patoul Decrypt. “So to me it’s a completely, completely different story.”

Keyrock, a Brussels-based crypto market maker and liquidity provider, has had to make some operational changes to how it moves US dollars without the Silvergate Exchange Network, or SEN. Besides Signature Bank’s Signet service, it was the only other way for crypto-friendly companies to settle large transactions with other institutions instantly.

“The other impact, which in my view is somewhat unfair, is that this is labeled as a crypto bug,” he said. “Obviously, I’m not familiar with their books, but the more I read into it, the more it seems like this is just a failure of a bank that also enabled crypto transfers.”

But it remains true that the SVB and Silvergate failures have left at least some crypto companies wondering where to bank or how to make payroll.

Y Combinator president and CEO Garry Tan said on Twitter that 30% of the famous Silicon Valley incubator’s portfolio companies knocked on SVB and will not be able to withdraw salaries in the next 30 days.

“This is an extinction level for startups and will set startups and innovation back by 10 years or more,” he wrote.

Protocol Labs, the research and development company behind Filecoin and the InterPlanetary File System, sent an email to the portfolio company’s founders on Friday and hinted at a few options.

“It is unclear what the larger fallout from this will be in terms of VC investment and the macro impact,” the company wrote in an email shared with Decrypt. “This and FTX reinforce the importance of diversifying your assets and banking/investment partners.”

However, there could be trouble for USD Coin issuer Circle. Just last week, the company announced it was cutting ties with Silvergate Bank, saying USDC minting and redemptions were fully operational.

The company said in its January cash reserve certificate, released earlier this month, that it has a portion of the reserves backing $43 billion worth of circulating tokens at Silicon Valley Bank.

“Silicon Valley Bank is one of six banking partners that Circle uses to manage the approximately 25% of USDC reserves held in cash,” a Circle spokesperson said. Decrypt. “While we await clarity on how the FDIC receivership of Silicon Valley Bank will affect depositors, Circle and USDC continue to operate as normal.”