The death spiral of the Terra (LUNA) and TerraUSD (UST) ecosystem served as the catalyst for the 2022 bear market, causing millions in losses, damaging investor confidence, and intensifying regulatory attention on cryptocurrencies. However, the recent de-pegging of the USD coin from Circle (USDC) led Binance CEO Changpeng ‘CZ’ Zhao to believe that traditional banks are a risk to stablecoins that are typically pegged 1:1 with fiat currencies. , like the US dollar.
On March 11, Circle revealed that Silicon Valley Bank (SVB) did not process its $3.3 billion withdrawal request. The crypto market responded to the disclosure by selling its holdings in USDC, causing the US dollar-backed stablecoin to lose its peg. Given SVB’s direct involvement in destabilizing USDC prices, CZ blamed banks for increasing stablecoin risks.
Banks are a risk to fiat-backed stablecoins.
— CZ Binance (@cz_binance) March 12, 2023
Supporting the CZ sentiment, a community member proposed the idea of a crypto-backed stablecoin. CZ responded by highlighting the defunct algorithmic stablecoin launched by Do Kwon, saying:
“Do Kwon actually had the right idea, but he failed miserably in execution.”
Besides, according for CZ, fiat currencies, by themselves, are a risk without including crypto in the equation.
Fundamentals.
— CZ Binance (@cz_binance) March 11, 2023
While numerous jurisdictions have taken legal action against Kwon, the businessman continues to reside in a safe haven unknown to authorities.
Related: Circle’s USDC Instability Causes a Ripple Effect on DAI and USDD Stablecoins
Many investors anticipated the possibility of a USDC decoupling and decided to sell their holdings to avoid losses. However, for one such investor, a hasty decision led to a loss of more than $2 million.
With USDC insolvency fears running rampant, users are fleeing to safety in other stables. However, not everyone is going to get there in one piece.
This is how one unfortunate user paid $2,080,468.85 to receive $0.05 of USDT. pic.twitter.com/R8YdudWfsV
— BowTiedPickle.eth | Solidity Carrier (@BowTiedPickle) March 11, 2023
Rather than sell his USDC holdings in a liquidity pool for a 6% slippage, the investor opted for a “questionable” method that ultimately led to a maximum withdrawable value (MEV) bot that made $2.045 million in profit afterward. to pay $45 in gas and $39,000 in MEV bribes.
