USDC Depeg: Contagion Spreading as TradFi Banking Collapses

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Summary

  • Coinbase and Binance both suspended USDC conversions due to volatile market conditions.
  • Circle revealed that $3.3 billion of USDC reserves remain at Silicon Valley Bank (SVB).
  • DAI, the decentralized stablecoin of MakerDAO, reached its lowest value ever at 0.88 cents.

Silicon Valley Bank Collapse

On Saturday, March 11, during Asian afternoon hours, DAI, the decentralized stablecoin of MakerDAO, reached its lowest value ever at 0.88 cents. This was in response to news that crypto firm Circle had revealed that $3.3 billion of USDC reserves remain stuck in Silicon Valley Bank (SVB) after the bank was placed into federal receivership and b both deposits and withdrawals ceased. Coinbase and Binance both suspended USDC conversions due to volatile market conditions while other crypto firms hurt by the SVB collapse included BlockFi, Circle and Avalanche. Tether surged momentarily on news it is unaffected by SVB.

USDC Depegging from Dollar

USDC lost 14 cents from its $1.00 peg tumbling to as low as .86 cents overnight following the news about SVB’s collapse. Nic Carter commented on this event saying it was „Operation Choke Point 2.0“ a remnant from Obama-era Justice department policy which placed restrictions on certain industries including online gaming and cryptocurrency businesses back in 2013-2014 . It was also noticed that 12 days ago Gregory Becker, CEO of Silicon Valley Bank sold 11% of his shares prior to this incident occurring adding further speculation as to what may have caused the bank’s downfall..

Circle’s USDC Redemptions Reaches $2.5 Billion In 24Hrs

In response to this event Circle tweeted out “Like other customers and depositors who relied on SVB for banking services , Circle joins calls for continuity of this important bank in the U.S economy and will follow the guidance provided by state federal regulators” As more people pull their funds out Circle reported a surge in redemptions with an estimated amount of 2.5 billion being withdrawn within 24 hrs leading many analysts believe there will be further price pressure downward for USDT in upcoming days..

Conclusion

Although investors have been left uncertain following this occurrence it is important to note cryptocurrency remains resilient regardless despite any bumps along road . The future looks bright as cryptocurrencies continue find ways innovate disrupt traditional banking systems .