The collapse of Silicon Valley Bank has jolted the entire crypto industry.
USD Coin issuer Circle’s $3.3 billion exposure to the bank has caused the stablecoin to lose its peg.
USDC fell as low as $0.87 earlier today as holders rushed to redeem the stablecoin and convert it to other crypto assets.
Opportunistic traders are scooping up USD Coins at a 10% discount in hopes of a gradual recovery.
The collapse of Silicon Valley Bank has sent shockwaves throughout the crypto industry, with considerable spillover into the traditional finance space. The fear and uncertainty from SVB’s closure have spelled trouble for several companies in the crypto space. The most notable crypto entity that is facing collateral damage is Circle Internet Financial, the issuer of the world’s second-largest stablecoin USD Coin (USDC).
USDC falls to $0.87 amid SVB induced turmoil
After hours of silence regarding its exposure to Silicon Valley Bank, Circle took to Twitter earlier today to reveal that it had $3.3 billion stuck in the downed bank. The funds are part of the $40 billion reserve that backs the USD Coin. Within an hour of this news, the stablecoin lost its peg to the dollar and proceeded to lose more than 11% of its value, falling as low as $0.87.
Dante Disparte, the Chief Strategy Officer of Circle revealed that the company was protecting its stablecoin from a “black swan failure in the U.S banking system.” Disparte emphasized the need for a federal rescue plan in order to avert “broader implications for business, banking, and entrepreneurs.” Silicon Valley Bank is the second largest FDIC-insured bank to fail in the United States. However, the Federal Deposit Insurance Corporation insures deposits up to $250,000.
American crypto exchange Coinbase, which launched USDC in partnership with Circle, suspended USDC: USD conversions for the stablecoin as holders rushed to exchange it for other crypto assets. The conversions will reportedly resume on Monday. According to blockchain analytics firm Lookonchain, Jump Trading, Wintermute, and Genesis Trading are among those who redeemed USD Coin for USD via Circle and Coinbase ahead of the weekend redemption break. Meanwhile, opportunistic traders have lined up to grab USDC at a 10% discount, in anticipation of a gradual recovery to its dollar peg.