USDC Stablecoin Falls After Silicon Valley Bank Crash

USDC is spinning up after the collapse of the Silicon Valley bank. A stablecoin ripple could have dire consequences.

The sudden collapse of Silicon Valley Bank (SVB) impacted the value of the world’s fifth largest cryptocurrency, raising concerns about a domino effect for Web3 companies. The US dollar fell to an all-time high of $0.87 this Saturday after Circle, the stablecoin management company, revealed that approximately $3.3 billion of its $10 billion cash reserve to support USDC is held by SVB.

USDC Turns Back After Silicon Valley Bank Crash

As noted by The Guardian, this fall is unprecedented. As a stablecoin, the value of USDC should remain stable thanks to the support of the US dollar. According to data from CoinGecko, the lowest value USDC has ever reached was around $0.97 in 2018. Most recently, the currency fell to $0.99 following the collapse of Three Arrows Capital. At the time of this writing, USDC is worth approximately $0.95.

Stablecoin turmoil that could have dire consequences

Web3 Going Just Great creator Molly White suggests that the consequences of such an extended drop in USDC could be “huge”. Many other stablecoins, including FRAX and DAI, use USDC as collateral. On Friday, Circle said it would “continue to operate as usual”as it awaits more information on what’s next for SVB customers. “This Thursday, we initiated the transfer of these funds to other partner banks. While these transfers are still pending as of late Friday, we have full confidence that the FDIC will handle the SVB situation and remain ready to receive these funds,” Circle said on Saturday, adding that $5.4 billion of its cash assets are owned by BNY Mellon.

previously people have claimed that USDC only lost its peg to less deep exchanges (kraken, gemini)

down almost everywhere now. I think it’s going to be a tough weekend. pic.twitter.com/4BCW6Lael9

— Molly White @ SXSW (@molly0xFFF) March 11, 2023