One of the world’s leading stablecoin or even considered as the second-largest in terms of capitalization, the USDC Stablecoin from Circle Internet Financial, temporarily lost its peg to the U.S. dollar due to some reports and some of its funds being deposited in the controversial Silicon Valley Bank.
USDC whose market cap is estimated to be worth around $42 billion was affected with the recent collapse of Silicon Valley Bank, which was shut down by government regulators after suffering a run on deposits.
As of posting time, USDC is now worth around $0.955 cents, as it slowly climbs back to the one dollar peg after suffering from an all-time low of 1USDC equivalent to $0.879 as of yesterday’s trading based on coinmarketcap.com.
According to Circle’s announcement some of USDC’s cash reserves were parked at Silicon Valley Bank worth around $3.3 billion in cash deposits, representing about 8% of the total reserves backing USDC.
Numerous articles posted online confirmed that concerned investors redeemed over $1 billion of USDC tokens on Friday, causing the stablecoin, one of the most popular in cryptocurrency, temporarily lose its dollar peg on some exchanges and pushing the largest stablecoin swap pool on Curve into heavy imbalance.
Cryptocurrency experts stated that stablecoins like the USDC are a crucial part of the crypto industry’s foundation, and when they deviate significantly from their peg particularly to the US dolalr, it raiss concerns about their financial footing.
The Silicon Valley Bank fiasco is the main culprit of the recent devaluation of USDC according to some experts. The bank collapsed on Friday, March 10, 2023, following a bank run and a capital crisis, which resulted in the second largest failure in the history of the United States in terms of financial institution.
Due to the collapse of SVB, the FDIC took control of the bank and will liquidate the bank’s assets to pay back its customers, including depositors and creditors.
Silicon Valley Bank also announced that it had sold securities at a loss before Friday and would sell new shares to shore up its balance sheets. The bank is instrumental in the entire Silicon Valley area as key venture capital firms reportedly advised companies to withdraw their money from the bank, triggering a panic in the entire valley are of California.
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