USDC and other cryptocurrencies were having a rough trading session Monday following an announcement from U.S. authorities outlining measures to minimize the impact of the collapse of Silicon Valley Bank.
Concerns regarding Circle’s $3.3 billion in USDC reserves held at SVB, which was shuttered by the California Department of Financial Protection and Innovation on March 10, drove the price of the stablecoin down to as low as $0.87 over the weekend.
Circle also has reserves at the recently collapsed Silvergate, the amount of which is undisclosed.
Circle CEO Praises US Government For Stepping In
On Sunday, Circle’s chief executive Jeremy Allaire tweeted his support for the government and Federal Reserve’s $25 billion funding initiative to help banks with liquidity issues.
“100% of USDC reserves are also safe and secure, and we will complete our transfer for remaining SVB cash to BNY Mellon,” Allaire wrote.
Update thread on USDC
We were heartened to see the US government and financial regulators take crucial steps to mitigate risks extending from the fractional banking system.
100% of deposits from SVB are secure and will be available at banking open tomorrow.
— Jeremy Allaire (@jerallaire) March 12, 2023
“As previously shared, liquidity operations for USDC will resume at banking open tomorrow morning,” Allaire said.
Meanwhile, at the time of writing, Bitcoin’s price was up from $20,334 to $22,111 in just 24 hours.
When USDC Depegs
USDC depegging from the U.S. dollar would have significant implications for the cryptocurrency market and the broader economy.
In this scenario, the value of USDC would no longer be directly tied to the U.S. dollar and could fluctuate independently based on market forces.
The depegging of USDC would likely lead to significant volatility in the cryptocurrency market, as traders and investors seek to adjust their positions to account for the change in value.
It could also have broader implications for the use of stablecoins in commerce, as merchants may be hesitant to accept a currency that is no longer pegged to a stable and widely accepted currency like the U.S. dollar.
The depegging of USDC could also have regulatory implications, as regulators may seek to scrutinize stablecoins more closely in the wake of such a significant event.
Additionally, the depegging could lead to increased competition among stablecoins as users seek out stablecoins that are more reliable and less prone to volatility.
BTCUSD is up down 1.7% in the last seven days and currently trading at $22,038 on the daily chart | Chart: TradingView.com
USDC Feels The Pinch
The crypto markets experienced a decline last week due also to the closure of Silvergate, while the collapse of Silicon Valley Bank also had a direct impact on the industry.
On Sunday night, U.S. regulators guaranteed all depositors would be safe after the fall of Santa Clara, California-based SVB and announced emergency measures to stem the spread of the crisis.
U.S. Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell, and Federal Deposit Insurance Corp. Chairman Martin Gruenberg made the announcement in a joint statement.
Despite the announcement, USDC still felt the pinch from the latest developments surrounding the crypto market.
According to data provided by CoinGecko, the price of one USDC is 98 cents as of this writing. Kraken’s USDC/USD exchange rate of 99.22 cents is the closest to its previous level of parity of any market.
Futures contracts for USDC-USDT on Binance are currently trading at 98.72 cents, a fraction higher than the current spot price of 98 cents, suggesting that some investors are hopeful that the peg will be reinstated.
-Featured image from Manhattan Gold & Silver