Popular Articles
Today Week Month Year


Cryptocurrency traders pull $3 billion from stablecoin USDC in just 3 days
By Cassie B. // Mar 21, 2023

Traders have pulled a total of $3 billion from the cryptocurrency stablecoin USD Coin in three days' time in the wake of the failure of Silicon Valley Bank and the coin's temporary loss of its dollar peg.

USD Coin, or USDC, is a type of digital currency that is fully backed using U.S. dollar assets, with the value of 1 USDC pegged to the value of a dollar at 1:1. It is meant to be stable, which is why it is known as a stablecoin, and is not subject to the type of price fluctuations seen by cryptocurrencies such as Bitcoin and Ethereum. USDC is currently the second-biggest stablecoin by market cap behind Tether USDT.

However, the coin broke its dollar peg following the collapse of Silicon Valley Bank, dropping as low as 88 cents on Saturday. Silicon Valley Bank was one of the main American banks used by cryptocurrency companies as a conduit between sovereign money and cryptocurrency, and the bank’s collapse was the biggest failure on record for an American bank since the crisis of 2008. The drop came after USDC issuer Circle announced in a tweet last week that it had $3.3 billion of its $40 billion in USDC reserves at the bank. This prompted a flurry of withdrawals, with the net $3 billion total representing nearly 10 percent of the coin’s circulating supply.

USDC regained its dollar peg after authorities set up a rescue package for Silicon Valley Bank depositors, which boosted confidence in cryptocurrency markets. Circle announced that it would be permitting automatic USDC redemption via a new banking relationship with Cross River Bank.

We are building the infrastructure of human freedom and empowering people to be informed, healthy and aware. Explore our decentralized, peer-to-peer, uncensorable Brighteon.io free speech platform here. Learn about our free, downloadable generative AI tools at Brighteon.AI. Every purchase at HealthRangerStore.com helps fund our efforts to build and share more tools for empowering humanity with knowledge and abundance.

In a blog post, Circle said that it processed $3.8 billion worth of USDC redemptions for investors who wanted to swap their tokens back to dollars and created $0.8 billion more of the tokens from Monday through Wednesday. This means that investors pulled roughly $3 billion during the three days in question.

Moody’s Analyst Cristiano Ventricelli said that USDC could have been in serious trouble without the rescue.

“The decision by US regulators to repay Silicon Valley Bank’s unsecured deposits in full allowed the USDC price to recover,” he said.

“Otherwise, USDC could have suffered from a run and been forced to liquidate its assets.”

Could financial institutions reconsider their involvement with stablecoin operators?

In a note, Moody’s analysts also said that USDC’s loss of its peg should serve as a reminder that the links between traditional finance and crypto can be unpredictable and that the incident “could prompt financial institutions to reconsider working with stablecoin operators.”

"This scenario would increase stablecoins’ dependence on a smaller number of institutions and constrain their ability to maintain stable exchange rates," they added.

Rival stablecoin Tether appears to be the big winner in the recent chaos, with its market capitalization hitting nearly $75 billion yesterday morning and reaching nearly twice that of USDC. In March 2020, USDC’s market cap was around $564 million; it is now at $37.7 billion.

Many investors who left USDC for alternatives during its brief depegging have not yet returned. Saturday’s drop was unprecedented for the coin; its previous record low was around 97 cents in 2018. However, it did drop just under 99 cents during the market scare caused by the collapse of the crypto hedge fund Three Arrows Capital.

Last month, American banking regulators issued a new warning that the crypto deposits in banks may be subjected to liquidity risks. They pointed to deposits linked to stablecoins in particular as being vulnerable to volatility at times of market stress should a sudden influx of redemption requests be made.

Sources for this article include:

Reuters.com

Decrypt.co

Reuters.com



Take Action:
Support NewsTarget by linking to this article from your website.
Permalink to this article:
Copy
Embed article link:
Copy
Reprinting this article:
Non-commercial use is permitted with credit to NewsTarget.com (including a clickable link).
Please contact us for more information.
Free Email Alerts
Get independent news alerts on natural cures, food lab tests, cannabis medicine, science, robotics, drones, privacy and more.

NewsTarget.com © 2022 All Rights Reserved. All content posted on this site is commentary or opinion and is protected under Free Speech. NewsTarget.com is not responsible for content written by contributing authors. The information on this site is provided for educational and entertainment purposes only. It is not intended as a substitute for professional advice of any kind. NewsTarget.com assumes no responsibility for the use or misuse of this material. Your use of this website indicates your agreement to these terms and those published on this site. All trademarks, registered trademarks and servicemarks mentioned on this site are the property of their respective owners.

This site uses cookies
News Target uses cookies to improve your experience on our site. By using this site, you agree to our privacy policy.
Learn More
Close
Get 100% real, uncensored news delivered straight to your inbox
You can unsubscribe at any time. Your email privacy is completely protected.