Abioye Shinaayomi
It’s no news that just some hours ago, USDC – “A Fully Reserved Stablecoin.” Began Depegging and this simply means that its value is no longer pegged or tied to the value of the asset it was designed to track. In other words, the stablecoin’s value starts to fluctuate independently of the value of the asset it was meant to be stable against.
This can happen for a variety of reasons, such as market forces or changes in the underlying asset’s value. A stablecoin – Like USDC Depegging today can have significant implications for users and investors who rely on the stablecoin’s stability, as it can lead to sudden changes in value that can be difficult to predict or manage.
Without any Federal rescue plans, a Circle executive sees wider consequences for business, banking, and entrepreneurs. At the time of writing this article, USDC had lost Three Percent (3%) of its value and was trading at $0.968 at the moment.
USDC’s price dropped below a dollar almost immediately after USD Coin (USDC) issuer Circle disclosed it was unable to withdraw 3.3 Billion USD of its 40 Billion USD from Silicon Valley Bank.
Circle started a wire transfer to remove its cash from SVB on March 9 because the bank, which was insured by the Federal Deposit Insurance Corporation, was poised to close its doors. On March 11, two days later, Circle revealed that 3.3 Billion USD of the USDC reserves have remained at Silicon Valley Bank and that the wire transfers had not been fully handled.
Following the revelation, USDC prices dropped, as shown by the data from TradingView, as shown below.
Prior to today’s USDC Depegging; The cryptocurrency-friendly bank Silvergate Bank shut its operations and declared earlier this week that it would “voluntarily liquidate” its assets. Circle said last week that it had discontinued ties with the bank.
With the announcement of SVB’s closure, shares of Signature Bank Holding Corporation (SI) have dropped by 12%. In December, Signature declared that it will withdraw up to $10 billion from its cryptocurrency-related deposits.
Two well-known cryptocurrency exchanges, Binance and Coinbase, both declared on Friday night that they would block USDC conversions while the consequences of Silicon Valley Bank’s bankruptcy were being felt.
The actions were taken in response to worries that Circle, the company that developed the USDC stablecoin, may have retained part of USDC’s cash reserves at Silicon Valley Bank, which California’s banking regulators shut down on Friday. (Centre, a joint venture between Coinbase and Circle, launched USDC initially.
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