USDC has been smashed with a damaging wave after news of the bankruptcy of Silicon Valley Bank on March 11. The stablecoin issuer Circle said it deposited $3.3 billion with the collapsed bank, leading to USDC uncertainty.
According to statistics from CoinMarketCap, the price of USDC dropped to an all-time low of $0.8774 due to concerns about the currency’s reserves. Onchain data suggests that investors are liquidating their USDC holdings for other assets.
Consequently, rival stablecoin USDT has gotten a considerable influx of volume during the previous 24 hours. The demise of Terra USD (UST) in May 2022 has acted as a cautionary tale for many crypto investors who want to avoid a similar fate with USDC.
However, Circle has attempted to reassure USDC holders that their assets are secure. In a tweet on March 11, Circle stated that Silicon Valley Bank was one of the six banking partners that it employs to maintain 25% of USDC reserves stored in cash. It said it sought clarification from the FDIC on how SVB’s bankruptcy might impact depositors.
Yet, several crypto businesses have reduced their USDC holdings. Binance said that they would temporarily cease their auto-conversion of USDC to BUSD. Coinbase followed suit and halted USDC to USD conversion until Monday. The exchange emphasized that during increased activity, modifications depend on USD transfers from banks that are performed during banking hours.
Moreover, Maker DAO accepted an emergency motion to decrease the USDC collateral for its DAI stablecoin. It was agreed that the debt cap of numerous liquidity pools, including USDC, would be cut to zero DAI, which indicates that they cannot continue issuing additional coins. In addition, the daily issue limit for what they term “stability modules” subject to USDC would be decreased from 950 million to 250 million DAI.
At the time of writing, the USDC price has rebounded by 3% over the last twenty-four hours and is now trading at $0.9552. The 24-hour trading volume has decreased by 31% to $14 million, but the overall market capitalization is around $38 billion.
The current crypto market attitude is divided, with some individuals emphasizing the centralization issues with stablecoins. Similarly, others attempt to take advantage of this circumstance to get USDC at a bargain. They think that USDC will re-establish its dollar peg, and they may benefit from the existing spread. As can be seen, views are different, and it remains to be seen how the stablecoin will do in the following few days.
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