In response to the extraordinary USD Coin stablecoin de-pegging event caused by the collapse of its counterpart Silicon Valley Bank (SVB), the crypto whales reported severe losses and appear to have embarked on a series of capital flights to protect assets. Du Jun, co-founder of cryptocurrency exchange Huobi Global, aware:
“[I] dodged, LUNA, dodged 3AC, even dodged FTX [and their collapse], but I couldn’t avoid Silvergate, neither SVB nor USDC. He asked some crypto veterans; the losses amounted to more than a billion dollars in shares and deposits, including myself. I’m very upset and it’s time to cut my budget.”
On the same day, blockchain personality and Tron founder Justin Sun reportedly Withdrew a total of 82 million USDC from the Aave V2 decentralized finance (DeFi) protocol in a series of transactions and exchanged it from the DAI stablecoin. At press time, 82 million USDC has a current value of $75.26 million.
Speaking of DAI, Maker Dao, the issuer of the stablecoin, filed an emergency protocol on March 11 that, among many items, called for restrictions on DAI minting using USDC in an effort to prevent panic selling. Maker DAO is one of the largest holders of the stablecoin with more than USDC 3.1bn ($2.85bn) in reserves collateralizing DAI, which also de-pegged as a result. Subsequently, crypto projects that incorporated DAI into their tokenomics also suffered losses due to a chain reaction.
Curve Finance, a popular DeFi protocol for trading stablecoins, reported a record daily trade volume of $5.67 billion due to the events. For context, the protocol alone has a total value locked up of $3.77 billion. Some other platforms simply couldn’t handle the sheer volume of USDC-related trade requests. In one incident, a user received only 0.05 USDT after paying more than 2.08 million USDC on an exchange that resulted in a permanent loss. In an update, KyberSwap, the decentralized exchange responsible for facilitating the exchange, saying he was “assisting with the recovery of funds” and is in contact with the user regarding the issue.
Senpai, have you already thrown away all your usdc?
— Curve Finance (@CurveFinance) March 11, 2023
According to Loki Zeng, a leading DeFi analyst at New Huo Technology, Circle’s reserves are spread between $32.4 billion in treasury instruments, $3.3 billion in SVB deposits, and $7.8 billion in deposits in other financial institutions. zeng wrote:
“For USDC to fail, it must meet three conditions: there are a large number of deposits at SVB and three other banks at risk, the recovery rate on such deposits remains low, and USDC cannot mitigate such losses.”
Zeng added that his personal opinion is that “there is a low probability of a problem, and even if there is a problem, it will not be as serious as FTX.” However, the DeFi analyst added that his estimate of USDC’s net worth is “$0.885 in extreme and $0.985 in normal.” At press time, the USDC price has fallen 8.30% in the last 24 hours to $0.9163 each.
Today, I finally understand the anger that led to the creation of Bitcoin.
Who do you entrust your livelihood to?
A “government insured” bank that isn’t actually insured?
An exchange that goes bankrupt?
A stablecoin taking off?
Or a currency that makes you 8% poorer every year?
— Nuseir Yassin (@nasdaily) March 11, 2023
Alex Svanevik, CEO of blockchain analytics firm Nansen, also commented that Circle and USDC “can do it.” However, Svanevik also warned that Circle requires “first-class execution over the next few days,” such as “flawless trades” and no calls for “bailout publicity.” In another tweet, Svanevik also revealed that a user moved 25 million USDC from his PulseX sacrifice wallet and exchanged it for DAI.
A few hours ago, someone moved $25 million USDC from the PulseX Sacrifice wallet to a new wallet and exchanged it for DAI.
Interesting.https://t.co/c0hZkquuZb pic.twitter.com/Pg3jB4aW1n
— Alex Svanevik (@ASvanevik) March 11, 2023
