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).
On Friday, California regulators placed the bank into receivership, leaving investors in need of clarification on the return of their deposits. As a result, the value of the USDC fell below its expected parity of $1, trading as low as 81.5 cents on March 11.
Stablecoin Unlinking
USDC is designed to maintain a constant value of $1, fully backed by cash and cash equivalents, including short-term Treasury bills. However, the exposure of Circle Internet Financial Ltd., the issuer of USDC, to SVB has caused the stablecoin to depeg. On Saturday, it was trading as low as 81.5 cents, while smaller stablecoins like DAI and Pax Dollar also fell from their pegs, signaling broader apprehension in the cryptocurrency market.
According of the circle Reserve report from January, the company had $9.88b of its money hidden in regulated institutions to support the USDC. Financial institutions that have maintained USDC for Circle include Bank of New York Mellon, Citizens Trust Bank, Consumers Bank, New York Community Bank, Signature Bank, Silicon Valley Bank, and Silvergate Bank.
Silicon Valley Bank’s collapse has also raised concerns among regulators and other bank customers. Circle joined calls for the bank’s continuity in the US economy and pledged to follow guidance from state and federal regulators.
Circle’s $3.3 billion USDC reserve remains in limbo as regulators seized the bank, leaving the value of USDC to continue to fluctuate, raising concerns among the crypto community.
USDC is a crucial trading board of the crypto markets, and its fluctuation could have broader implications for the broader market. However, Tether, the main stablecoin, remained at $1 despite having faced scrutiny over its reserves in the past.
Circle Redeems $2 Billion Net USDC Amid Market Turmoil
USDC has a circulating supply of around 41 billion tokens and a market value of approximately $37 billion. According to blockchain research firm nansenCircle redeemed $2 billion USDC net in the last 24 hours.
According to data from CoinMarketCap, USDC plunged as low as 81.5 cents. Crypto assets are mostly in the red, with bitcoin (BTC) hovering around the $20,000 mark. Meanwhile, most altcoins are under pressure, with dogecoin (DOGE) and litecoin (LTC) posting double-digit losses.