key takeaways
- Circle’s USDC is trading back at $1.
- The stablecoin broke its peg on Friday after Circle revealed it was exposed to Silicon Valley Bank.
- The US government intervened to ensure that all SVB depositors would recover.
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After breaking its peg over the weekend and trading as low as $0.87, Circle’s USDC stablecoin is now at $1 again.
1 USDC for $0.87
All eyes are on the USDC as the banking crisis progresses.
Circle’s USDC regained its $1 peg today after a tumultuous weekend that saw the second-largest stablecoin by market cap plunge to $0.87.
Stablecoins are cryptocurrencies designed to keep up with a government-issued currency, such as the US dollar or the euro. In the case of USDC, parity is achieved and maintained by backing each token with 1:1 dollar reserves.
However, Circle revealed late on Friday that, of its $40 billion in reserves, $3.3 billion remained stuck in Silicon Valley Bank. Silicon Valley Bank experienced a run on the bank shortly after announcing on Wednesday that it was taking extraordinary and immediate steps to shore up its finances, including selling $21 billion of its most liquid assets, borrowing $15 billion, and raising cash by arranging an emergency sale of its Actions. The FDIC forced the bank to close on Friday.
Circle’s disclosure, compounded by the firm’s inability to redeem USDC directly over the weekend due to banking system business hours, sent USDC tumbling as low as $0.87, per Coingecko data. However, Circle CEO Jeremy Allaire took to Twitter on Saturday to ensure that the company would indeed redeem USDC tokens at a 1:1 ratio on Monday morning as usual. The statement helped USDC rally to $0.94.
The USDC fully returned to its peg shortly after the US government announced that it would take steps to ensure that all Silicon Valley Bank depositors were made whole. Allaire responded to the news by stating that Circle would move all of Silicon Valley Bank’s remaining deposits to BNY Mellon, another of Circle’s banking partners.
Disclosure: At the time of writing, the author of this article owned BTC, ETH, and various other crypto assets.