Korva is a scroll of the internet’s best ideas.
Launched a bank as FTX collapsed
Venmo for investing
It began when a founder, invited to invest in a startup, was told he could wire the money once the documents arrived. He had never made an outbound wire transfer and wondered why investing wasn't like Venmo. The company, Party Round, became Venmo for fundraising and investing, and in 2021 a lot of venture investors loved the idea.
A bad launch month
It built a fairly viral brand on X and evolved into a banking product, basically a stablecoin bank. The month it launched, FTX collapsed, which killed much of the excitement around crypto. A few months later, SVB collapsed, and people started caring how much FDIC coverage they had.
The coverage gap
The company carried the standard $250,000 of coverage, while its average customer balance was around a million dollars. With a bank run underway, customers were told to be practical with their business. The company was acqui-hired by a firm in New York City.
Why does deposit insurance cap at a fixed amount?
Congress created the FDIC in 1933 after thousands of banks failed during the Great Depression. It insures deposits up to a set limit per depositor, per insured bank, and per ownership category. The limit rose from 100,000 dollars to 250,000 dollars in 2008, during the financial crisis, and the 2010 Dodd-Frank Act made the higher figure permanent.
How does a bank run actually unfold?
Banks lend out most deposits and keep only a fraction as cash, so they cannot repay everyone at once. If many depositors withdraw together, the bank has to sell assets, sometimes at a loss. Economists Douglas Diamond and Philip Dybvig published a model in 1983 showing that fear of a run can cause one, even at a bank that was sound before the panic.
How far did crypto prices fall around FTX's collapse?
FTX filed for Chapter 11 bankruptcy protection on November 11, 2022. Bitcoin had peaked near 69,000 dollars in November 2021, and by the end of November 2022 it traded below 17,000 dollars. Many other tokens fell as well, and the downturn was often referred to as a crypto winter.
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