USDC depeg – Everything we know so far as contagion spreads from TradFi banking USDC depeg – Everything we know so far as contagion spreads from TradFi banking
Coinbase and Binance both suspend USDC conversions until the dollar peg stabilizes, while BlockFi and Avalanche both reveal ties to SVB.
2 min read
Updated: Jun. 23, 2023 at 10:43 pm UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
What we know so far about the SVB collapse and USDC/DAI depeg (updated):
- Crypto firm Circle reveals $3.3 billion stuck in SVB
- DAI/USDC depeg as stablecoin pressure continues after Silicon Valley bank collapse
- Binance suspended USDC conversions due to volatile market conditions
- Coinbase suspended USDC conversions “over the weekend while banks are closed”
- SVB contagion: crypto firms hurt include BlockFi, Circle, and Avalanche
- Circle’s USDC Redemptions Reaches $2.5 Billion In 24Hrs, Exchange Inflow $7B
- On Saturday, March 11, during Asian afternoon hours, DAI, the decentralized stablecoin of MakerDAO, reached its lowest value ever at 0.88 cents
- Nic Carter says the crackdown is “Operation Choke Point 2.0” a remnant from Obama-era Justice department policy
- 12 days ago, Gregory Becker, the CEO of Silicon Valley Bank, sold 11% of his shares
- Tether, the stablecoin USDT, surged momentarily on news it is unaffected by SVB
TradFi banking contagion
A day after the west-coast bank Silicon Valley Bank (SVB) was placed into federal receivership and b both deposits and withdrawals ceased, Circle, the issuer of the stablecoin USDC, lost its $1.00 peg to the US dollar, prompting fears of a run on the stablecoin similar to what happened during the wind-down of UST in the wake of its depegging from Terra Luna.
Overnight, USDC lost 14 cents from its $1.00 peg, tumbling to as low as .86 cents.
“Following the confirmation at the end of today that the wires initiated on Thursday to remove balances were not yet processed, $3.3 billion of the ~$40 billion of USDC reserves remain at SVB,” Circle said in a tweet.
“Like other customers and depositors who relied on SVB for banking services, Circle joins calls for continuity of this important bank in the U.S. economy and will follow the guidance provided by state and Federal regulators.”
That news followed fears that the contagion from the SVB collapse would also affect other crypto institutions, which it has, with both BlockFi and Avalanche also revealing connections to the distressed bank.
The news has prompted renewed fears that fiat on/off ramps in crypto can become “choke points” for the government to target the crypto industry at large.
Twitter Reactions
LOOK OUT BELOW pic.twitter.com/Cm72Ec854S
— beeple (@beeple) March 10, 2023
CZ took to Twitter to speculate if it was time for exchanges like Binance to start buying up distressed banks.
Leveraged positions open up
Some traders are purchasing USDC in anticipation of a potential 10% gain if the tokens return to the intended dollar mark. These traders are betting on this gradual recovery to $1 due to the relatively cheap price of USDC. Leveraging could potentially amplify returns for these traders, as evidenced by the futures funding rates on Bybit, which reached as high as 0.3% on Saturday morning.
Opened $114k $USDC long at $0.87
Lets go.
You know shit is hitting the fence when you are lev trading a "stable" coin 🤡 https://t.co/TPEUbfM80b pic.twitter.com/Yl3KnGBlXf
— Defi_Maestro 🫐 (@Defi_Maestro) March 11, 2023
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Author 
Dorian Batycka
Dorian Batycka is a journalist interested in art and technology. He has previously contributed to CoinDesk, Decrypt, Artforum, Artnet News, the Art Newspaper, and many others. He can be found on Twitter and Instagram @temp_projects, where he often memes his way through current financial and art news, scandals, and events.
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In this article
USD Coin (USDC) is a stablecoin fully backed by the US dollar and developed by the CENTRE consortium.
Circle
Circle Internet Financial Ltd is a global internet finance company, built on blockchain technology and powered by crypto assets.
