The crisis in the United States banking system has had a profound impact on stablecoins in cryptocurrency markets such as USDC. What is the connection between the bad weather in the financial markets that started with the closure of SVB and stablecoins? Why has USDC fallen below its stablecoin value? You will find answers to these questions in this article.
Recent Events in USDC
On March 8, the crisis in the US financial markets, which started with the bankruptcy of Silvergate Bank and further ignited with the bankruptcy of Silicon Valley Bank, was last affected by the bankruptcy of Signature Bank on March 12. During these developments in the last four days, USDC and other stablecoins in the crypto markets could not maintain their stability.
All of this happened after US crypto company Circle’s USD Coin announced that about 8% of the company’s $40 billion reserve is tied to Silicon Valley Bank, and USDC suffered a record decline.
Exchange Movement
Shortly after Circle’s announcement, major exchanges such as Binance and Coinbase took action and announced that they would temporarily suspend USDC conversions. This means that users with USDC held on exchanges will not be able to unload it or exchange it for another asset.
Depegging Spreads to Other Stablecoins
Dark clouds hang over the United States banking system, and the bad weather caused by the stablecoin USDC breaking its peg has also spread to DAI(Kendi Yazı Linkim), USDD, and USDP, which are pegged to the dollar. Last Saturday, DAI – $0.93, USDD – $0.95, and USDP traded at $0.96.
DAI
DAI Coin is the first decentralized, collateral-backed stable cryptocurrency. DAI is an ERC-20 crypto asset with the goal of achieving a stable value of 1:1 with the US dollar by locking other crypto assets in contracts. DAI has now reached a stable value of $1.
USDD
USD Digital (USDD) officially debuted on May 5, 2022, as a stablecoin on the Tron, BNB Chain, and Ethereum blockchains and is pegged 1:1 to the US dollar. The current value of USDD is $0.99.
USDP
Pax Dollar (USDP) is a stablecoin that was founded in 2018 and is collateralized by fiat money. USDP has now reached a stablecoin value of $1.
Following the downturn, the markets have been relieved after the United States Federal Deposit Insurance Corporation (FDIC) announced that it plans to pay 95% of uninsured deposits and that 50% of uninsured deposits will be paid next week. According to CoinMarketCap, USDC is currently trading at $0.9985.
Circle Not the Only One Affected by SVB
Along with Circle, many crypto companies were also affected by the sudden collapse of Silicon Valley Bank. BlockFi, Avalanche, Proof, and Yuga Labs are among the other companies affected. In addition, as we have written before, Paradigm, Pantera Capital, and Andreessen Horowitz (a16z) had more than $5 billion in the capital in Silicon Valley Bank.
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