Circle, the company behind the USDC stablecoin, confirmed late Friday that $3.3 billion of its cash reserves were stuck at the failed Silicon Valley Bank. The sum represents about 8% of the total reserves backing USDC.
On this news, USDC lost its peg to the US dollar overnight, dropping as low as $0.88. That caused a domino effect on other stablecoins, including DAI (by Maker), USDD (by Tron), and USDP (by Paxos). Actually, 9 out of the top 10 stablecoins traded below their dollar peg this weekend, with Tether as the sole survivor.
The market reacted to this news with a panic sell-off, where one USDC holder (via some nth-layer tokens, though) was unlucky enough to pay $2 million to receive $0.05 of USDT. "How was that even possible?" – some of you may reasonably ask. Well, that's how (thread):
But with all these market fluctuations:
Indeed, the real question sounds that simple (the answer is not always that simple, but still). And later on Saturday, Circle claimed in a blog post that it will "cover any shortfall" caused as a result of its funds held by the collapsed bank. The CEO of the company reiterated the commitment in a Twitter thread:
Also, on Sunday Washington Post reported that US federal authorities are considering safeguarding all the uninsured deposits at Silicon Valley Bank to save the tech industry from the effects of the largest bank failure since the 2008 financial crisis.
That was enough to USDC repeg slowly to the dollar and the broader crypto market showed a good bounce from the last week's lows.
An ordinary end (hopefully) to an epic saga. But the aftertaste remains. Not to say it's a fresh idea, but the reminder to us all looks clear enough:
CZ added even:
Still, the real impact of Silicon Valley Bank's bankruptcy on the crypto industry is yet to be fully realized, and the coming week may prove to be crucial in this respect. On March 13, the Federal Reserve Board of Governors, including includes Fed Chairman Jay Powell, will hold a regularly scheduled closed-door meeting.
And, of course, Circle is not the only crypto company slammed by the sudden collapse of Silicon Valley Bank: several projects, including BlockFi, Avalanche, Proof, and Yuga Labs, also disclosed their exposure to Silicon Valley Bank these days. But among those names, Circle is in a unique position, being responsible for maintaining trust in a product that is claimed to be consistently backed by cash reserves and redeemable for $1.