Circle’s $3.3b USDC Reserve Affected By Silicon Valley Bank’s Collapse
Circle’s USDC, the second-largest stablecoin with a market capitalization of $43 billion, has been hit by the collapse of Silicon Valley Bank (SVB), leaving investors in need of clarification on the return of their deposits. On Friday, regulators in California placed the bank under receivership, causing the value of USDC to fall below its intended $1 peg, trading as low as 81.5 cents on Mar. 11.
Circle’s USDC, the second-largest stablecoin with a market capitalization of $43 billion, has been hit by the collapse of Silicon Valley Bankhttps://t.co/Cx6YibK3JI
— crypto.news (@itscrypto_news) March 11, 2023
USDC’s Peg Loss
USDC is designed to maintain a constant value of $1, fully backed by cash and cash equivalents, including short-dated Treasuries. However, the exposure of Circle Internet Financial Ltd., the issuer of USDC, to SVB has caused the stablecoin to de-peg, with smaller stablecoins like DAI and Pax Dollar also falling from their pegs, signaling broader crypto market apprehension.
According to Circle’s January reserve report, the company had $9.88 billion of its money stashed at regulated institutions to back up USDC, including Silicon Valley Bank. The collapse of the bank has also raised concerns among regulators and other banking customers.
Circle’s USDC Reserve in Limbo
Circle joined calls for the bank’s continuity in the U.S. economy and vowed to follow the guidance provided by state and federal regulators. However, Circle’s $3.3 billion USDC reserve remains in limbo as regulators seized the bank, leaving the USDC’s value to continue fluctuating, causing concern among the crypto community.
USDC is a crucial plank of crypto markets, and its fluctuation could have broader implications for the overall market. Tether, the top stablecoin, held at $1 despite facing scrutiny over its reserves in the past. USDC has a circulating supply of about 41 billion tokens and a roughly $37 billion market value. According to blockchain research firm Nansen, Circle redeemed a net $2 billion USDC in the past 24 hours. According to data from CoinMarketCap, USDC plummeted as low as 81.5 cents.
USDC’s Stability Threatened
The crypto market was mostly in the red, with bitcoin (BTC) oscillating at around the $20,000 mark. Meanwhile, most altcoins are under pressure, with dogecoin (DOGE) and litecoin (LTC) noticeably printing double-digit losses.
The collapse of Silicon Valley Bank has caused a stir in the crypto market, and its effects on USDC’s stability have raised concerns about the resilience of the broader crypto ecosystem. With the future of Silicon Valley Bank still uncertain, the crypto community will be watching closely to see how Circle and USDC will weather this storm.
