Just this week, renown FDIC-insured Silicon Valley Bank ($SIVB) saw it’s shares fall more than 80% as rumors of insolvency emerged. Unfortunately for all those involved, SVB truly experienced a bank run, with regulators quickly shutting it down and trading of it’s stock halted.
However, the damage had been done – cash held in SVB by institutions, individuals, and corporations were inaccessible.
One of the institutions affected was Circle, the issues of stablecoin $USDC.
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USDC Held $3.3 billion in Cash With SBV
According to a statement by Circle, they currently hold reserves for $USDC in the following denomination:
77% Treasury Bills ($32.4 billion)
23% Cash ($9.7 billion)
While these assets are further spread out amongst multiple institutions, $3.3 billion, or 7% of their reserves, were held in SVB.
This revelation sent $USDC into a freefall, trading for as low as $0.87 on some exchanges. Furthermore, stablecoins collateralized with $USDC such as FRAX and DAI saw a similar dip in price.
Thankfully, Circle CEO Jeremy Allaire has informed investors that $USDC is still fully redeemable at a 1:1 ratio. Furthermore, it’s slow return to peg was due to a short-term illiquid crunch over the weekend, as the U.S. Banking system only operates on weekdays.
USDC did not have exposure to SIlvergate, another bank that collapsed this week.
Crypto Investors Not Out of The Woods Just Yet
SVB held more than $200 billion in assets last quarter, with many of them from tech-based startups and companies. While Circle’s $3.3 billion in assets drew the most headlines due to $USDC’s depeg, many other crypto companies were affected as well.
While most companies like Proof, Yuga Labs, and Avalanche managed to come away relatively unscathed thanks to diversifying their assets, others have not been as fortunate.
While no major crypto-centric companies have yet reported major exposure to SVB, we are sure to see some level of fall out in the coming days.
Additionally, popular Decentralized Exchange Curve saw major withdrawals of $USDT in exchange for $USDC and $DAI during the de-peg.
During this period, many worried users hurrying to swap their $USDC also faced major losses due to MEV or other arbitrage mechanisms, like this transaction which saw more than $2 million in $USDC being swapped for a paltry $0.05 in $USDC.
Also Read: Interest Rates, GBTC & Mt. Gox: Here’s Why The Crypto Markets are Down Today
[Editor’s Note: This article does not represent financial advice. Please do your own research before investing.]
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