The recent collapse of SVB and its implications for the cryptocurrency industry have caused validators running the ETH network to experience a substantial surge in profitability. According to Flashbots’ data, which provides the software behind 89% of all MEV activities, Ethereum validators witnessed profits from the MEV spike following SVB’s crash and USDC’s de-pegging.
Profiting Through MEV
MEV is an essential aspect of trading via the Ethereum (ETH) protocol. It points to the extra profits validators earn by reordering or inserting transactions in a block.
Many compare MEV with arbitrage in traditional finance markets. Flashbots developed software called MEV-Boost which allows for requesting blocks from builders.
The MEV-Boost is the primary way Ethereum validators obtain MEV through relays. Due to 89% of validators adding blocks to Ethereum through MEV-Boost and Flashbots relaying most of the blocks, most data showing MEV activity do so in numbers.
As a result, recent events have led to a dramatic profit increase for the Ethereum network validators.
Opportunities For Profits
After SVB was shut down, Circle announced on Friday that its 3.3 billion USD cash deposits were still in the bank. As a result, many users rushed to withdraw or move their USDC, causing an increase in available transactions to produce MEV profits.
In this period, MEV-Boost’s user’s relay earned a peak of 7,691 Ethereum last Saturday, valued at about $13 million. This value was above double the previous peak during the FTX crash on November 9 last year, where MEV rewards gotten via Flashbots amounted to $5.5 million (about 3,202 ETH).
On March 12, the profits of MEV via Flashbots had significantly decreased to a normal level of about 2,282 Ethereum. The dip in transaction movement came from Circle’s announcement that they would take responsibility for shortfalls in the USDC reserves.
This announcement caused the USDC to regain its peg to the US dollar. An Ethereum researcher — Toni Wahrstätter, emphasized that during times of incredibly high MEV, validators are the ones who earn the majority of MEV rewards.
They do so without needing private deals, complicated algorithms, or anything other than securing the ETH blockchain. When a piece of vital news impacts financial markets, cryptocurrency prices move quickly, creating profit opportunities.