What happening with USDC?

[BitcoinPanther]

Not really sure how all these stable coins work but how did a stable coin that is supposed to be equal to one US Dollar go down in price?

USDC de-pegged with USD because of the event of Silicon Valley Bank issue. It was said that "the depegging happened after Circle, the issuer of USDC, disclosed on Friday night that some $3.3 billion worth of the cash reserves that back USDC remain held at Silicon Valley Bank, which was shut down by California financial regulators this week after a bank run."[1]

It became worse when some crypto exchanges temporarily suspended USDC conversions[1], but as of this reply, USDC somehow recovered, and it was assume that USDC will be back to its normal operation by this Monday.



[1] https://decrypt.co/123211/usdc-stablecoin-depegs-90-cents-circle-exposure-silicon-valley-bank

[1715298467]

1715298467

[1715298467]

1715298467

[Jackl87]

Not really sure how all these stable coins work but how did a stable coin that is supposed to be equal to one US Dollar go down in price?

As others in this thread have already said, it all has to do with the current happenings around that Silicon Valley Bank. Circle has now officially confirmed, that 3,3 Billion $ out of their 40 Billion $ total reserves were kept at that bank and that bank is nor bankrupt. Obviously some people become nervous when they hear such news and in this case i even think it could be a proper reaction to be afraid. Then once the first people begin to sell of all their USDC at the same time the price goes down a little and this then triggers the people there were nervous but have not sold yet and they sell then too and this is kind of a vicious circle.

[Marvelman]

In his first public statement since the depegging of USDC from the dollar, Circle CEO Jeremy Allaire has reassured investors that the stablecoin can still be redeemed for dollars at a 1:1 ratio. The company update, which was also shared on Twitter, comes after over $6.3 billion was wiped from the second-largest stablecoin's market capitalization.

Tl;Dr: While USDC can be used 24/7/365 on chain, issuance and redemption is constrained by the working hours of the U.S. banking system.

USDC liquidity operations will resume as normal when banks open on Monday morning in the United States. As a practical matter, our teams are well prepared to handle significant volume, built on the strong liquidity and reserve assets discussed below.

As a regulated payment token, USDC will remain redeemable 1 for 1 with the U.S. Dollar.

https://twitter.com/jerallaire/status/1634649886397267969

[mich]

Well I do not hodl enough USDC to panic but it is not a good thing happening. There is so much fear right now and FUD we do not know if another Stable coin will also lose the 1 dollar peg.
Some good news is Circle says it will cover any missing liquidity in Silicon Valley Bank using corporate funds. https://cointelegraph.com/news/circle-plans-to-cover-missing-liquidity-in-silicon-valley-bank-with-corporate-funds

[hugeblack]

The CEO Circle Jeremy Allaire tried to explain in detail on his Twitter what happened to USDC and and Silicon Valley Bank - https://twitter.com/jerallaire/status/1634649346535833601?s=20 And it looks like he managed to reassure investors, as the price increased to $0.978 Obviously, someone has made a very good profit on this Fud today.

Although his words seem logical, and I believe that they will return to the price of one dollar soon, but why did the price drop so sharply in such a short period?
This means that the liquidation of 600 million dollars will cause a price loss of 0.98, or at least 0.95, and therefore is FUD  the reason for withdrawing the rest? Or is the exposure greater than that amount?
In general, we hope that tomorrow this story will end

[Gayong88]

Basically, USDC is a stable coin with fiat collateral, meaning that someone holds $1 USD as collateral and will mint and burn coins upon request. However, it turns out that $1 USDC isn't really worth $1. occurs when the price goes up, or down

When a stable coin is worth less than US Dollars, this is what is called "negative parity". This means that it is set to lose value. But how did this happen? One possible explanation is that someone took out multiple loans using USDC as collateral and the loans were not repaid. Another possibility is that there are more coins in circulation in people's wallets than US Dollars.

In other words, there may be more people investing in buying coins than actually circulating them themselves.

[gunhell16]

Not really sure how all these stable coins work but how did a stable coin that is supposed to be equal to one US Dollar go down in price?

If anything happened to the USDC, it is because there is a lot of FUD that is spreading in the cryptocurrency news, so other community investors are panicking about what is happening in the market.

But from what I can see, usdc can overcome that, I'm sure because it's not like ust, so if you have usdc, don't swap first, wait for the return to 1:1 rate, maybe usdc can solve that.

[tvplus006]

The CEO Circle Jeremy Allaire tried to explain in detail on his Twitter what happened to USDC and and Silicon Valley Bank - https://twitter.com/jerallaire/status/1634649346535833601?s=20 And it looks like he managed to reassure investors, as the price increased to $0.978 Obviously, someone has made a very good profit on this Fud today.

Although his words seem logical, and I believe that they will return to the price of one dollar soon, but why did the price drop so sharply in such a short period?
This means that the liquidation of 600 million dollars will cause a price loss of 0.98, or at least 0.95, and therefore is FUD  the reason for withdrawing the rest? Or is the exposure greater than that amount?
In general, we hope that tomorrow this story will end

A little math:
Circle has $3.3 billion blocked in SVB from Circulating Supply of $40.7 billion. Thus, 8.1% of Total Supply is blocked, which corresponds to the price of 0.919 USDC for 1 dollar. It is this price that is currently equitable, reflecting the ratio of reserves and Total Supply USDC.

[el kaka22]

I do not know how much this silvergate issue really hurt USDC or not. I understand that circle lost some huge amounts there, and that is why it's down right now, but does it really mean that they had no reserves at all? Maybe they still have enough for 1 to 1 ratio and this was just excess amount they had?

I really do not know, but if it is true that they lost peoples money in this bankruptcy then we are all in trouble with all the other coins as well. They might as well be gone too, USDT or anything else too, because even if they didn't had money in silvergate, they have it somewhere else and it could be gone just like this one day and we would be in trouble.

[nicolas1979]

Not really sure how all these stable coins work but how did a stable coin that is supposed to be equal to one US Dollar go down in price?

Yes, the price reduction is no longer relevant to the value of the USD. And that's the lowest price since USDC was launched, which is $ 0.877. It seems that before the price drop, there was an increase in the amount of trading volume. But the price that has become irrelevant to the USD has also happened to USDT with a value of $ 0.56, but this is an old occurrence, maybe the price is launching. But if the USDC drops suddenly at this time it certainly makes us worry. When USDC drops, the price of USDT increases.

[jossiel]

Not really sure how all these stable coins work but how did a stable coin that is supposed to be equal to one US Dollar go down in price?

USDC is made by Circle.

Circle has $3.3B deposits in Silvergate bank.

Silvergate bank files forced liquidation and that means a lot for Circle and mostly affecting USDC.

Just like the collapse of UST and Luna, that means a lot to the market which affects the entire whole crypto market but I don't think that USDC will be ending the same as UST/USTC. And whenever there's sort of news like this, the involved crypto whether it's a stable coin or an alt coin, it's always been affected and getting a lot of dumps which results to its value goes down.

Circle does not have a $3.3B deposit in Silvergate, it is on another bank, SVB or Silicon Valley Bank. See this tweet from the official Circle account: https://twitter.com/circle/status/1634391505988206592.

Based on monthly the latest Jan 2023 attestation, Silvergate is one of another bank who Circle held the reserves. As we know, besides SVB which goes bust, Silvergate the bank is also closing down its business, but it will come with full repayments of the deposit.

Contratry to UST, I don't think it will have the same effect, the market got swayed down is certain, but the degree if USDC going collapses will be much significantly deeper, note that DAI is also affected.

I appreciate you for correcting me.

Based on the development that I'm seeing right now, it seems that USDC is starting to do better.

~Snipped~

My main concern is that this collapse greatly affects the market. I don't mind the recent fall of Bitcoin; I'll receive more BTC through my signature campaign, and I'm happy about that, but FUD is going to spread all over cryptocurrencies again, which, as I said earlier, is putting a dent in how people perceive cryptocurrencies. Hopefully, I didn't have any USDC, only USDT and BUSD, and although I also believe (and hope) that it'll recover soon, I doubt that it's going to crash even further.

I also don't have these stablecoins and your concern is valid not just for your own sake but for the market. So far as for the wishes for the market's recover, I think that it's greatly recovering as of now and hopefully this keeps up.

most likely will not be ending the same way but 3.3 billion $ is not chump change, that's serious money to lose.
also might take years to come to a conclusion as the bank goes in to bankruptcy...ect

Yeah $3.3B is a lot but it seems that there's some positive news that's been released about SVB, Silvergate, etc. and that might be the reason for the market's up today.

[tvplus006]

...there's some positive news that's been released about SVB, Silvergate, etc. and that might be the reason for the market's up today.

After the Federal Reserve Board announced that "make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors" - https://www.federalreserve.gov/newsevents/pressreleases/monetary20230312a.htm, the cryptocurrency market began to move up. So we can assume that the value of USDC will be restored already on Monday.

[larry_vw_1955]

I really do not know, but if it is true that they lost peoples money in this bankruptcy then we are all in trouble with all the other coins as well. They might as well be gone too, USDT or anything else too, because even if they didn't had money in silvergate, they have it somewhere else and it could be gone just like this one day and we would be in trouble.

well yeah i mean anything that promises it will be worth a certain amount of fiat can't really be 100% trustable. bitcoin doesn't promise it will be worth anything that's how it gets around that loophole. you buy you hope you pray but if it goes to 0 that's just your bad luck. 

plus usdc they can freeze your money so you can't use it on chain at all. so not the ideal thing...

[Hispo]

The dumbest thing about this situation is the fact that MakerDAO advertises DAI as a decentralized issued stablecoin and yet the most of the backing for DAI is made through the locking of USDC, it is absurd.  

Fortunately, it seems both USDC and DAI have almost recovered their peg to the USA dollar, otherwise the ecosystems which depend on both coins stability would be in huge problems. I hope the guys at MakerDao learn from this event and get swap most of their USDC and use Ethereum as over-collateral for DAI.

that would likely need the deployment of a new smarth contract, though.

[posi]

I do not know how much this silvergate issue really hurt USDC or not. I understand that circle lost some huge amounts there, and that is why it's down right now, but does it really mean that they had no reserves at all? Maybe they still have enough for 1 to 1 ratio and this was just excess amount they had?

I really do not know, but if it is true that they lost peoples money in this bankruptcy then we are all in trouble with all the other coins as well. They might as well be gone too, USDT or anything else too, because even if they didn't had money in silvergate, they have it somewhere else and it could be gone just like this one day and we would be in trouble.

Nothing is absolutely safe, once invested, we should have a plan for these risks. Not only USDT, but even if you hold bitcoin, it only assures you that the asset remains in your hands, not your asset value. In previous cycles of inflation and economic crisis, there have also been bank and corporate failures, so it is not surprising that it repeats itself. I think that's just the beginning, and there will be much worse this year, the economic crisis has not gone away, and it threatens us even more.

[larry_vw_1955]

Fortunately, it seems both USDC and DAI have almost recovered their peg to the USA dollar, otherwise the ecosystems which depend on both coins stability would be in huge problems. I hope the guys at MakerDao learn from this event and get swap most of their USDC and use Ethereum as over-collateral for DAI.

imagine if usdc said they were backing it up using ethereum.  that's kind of like cheating right? you can't backup something pegged to the us dollar with some fluctuating cryptocurrency. not really.

[wxa7115]

I do not know how much this silvergate issue really hurt USDC or not. I understand that circle lost some huge amounts there, and that is why it's down right now, but does it really mean that they had no reserves at all? Maybe they still have enough for 1 to 1 ratio and this was just excess amount they had?

I really do not know, but if it is true that they lost peoples money in this bankruptcy then we are all in trouble with all the other coins as well. They might as well be gone too, USDT or anything else too, because even if they didn't had money in silvergate, they have it somewhere else and it could be gone just like this one day and we would be in trouble.

It is going to hurt USDC on the long run, even if it seems they have solved the crisis for now it is not as if this is going to be the last time that yet another bank goes bankrupt, and if anything we must expect this to happen more often during the next years.

So if the owners of stable coins are relying on financial institutions to safeguard their funds then sooner or later this will happen again, and this will erode the confidence investors have on stable coins even further.

[BobK71]

Not really sure how all these stable coins work but how did a stable coin that is supposed to be equal to one US Dollar go down in price?

USDC is made by Circle.

Circle has $3.3B deposits in Silvergate bank.

Silvergate bank files forced liquidation and that means a lot for Circle and mostly affecting USDC.

See news: Crypto bank Silvergate announces liquidation amid sector turmoil

Just like the collapse of UST and Luna, that means a lot to the market which affects the entire whole crypto market but I don't think that USDC will be ending the same as UST/USTC. And whenever there's sort of news like this, the involved crypto whether it's a stable coin or an alt coin, it's always been affected and getting a lot of dumps which results to its value goes down.

USDC has nothing to do with UST; it won't have the same fate. However, this is denting trust in cryptocurrencies, especially stablecoins. Do you believe that the USDC will recover? We are already seeing other stablecoins depegging; even BUSD has suffered losses, though minimal, and it's still below $1. DAI has also suffered a major decline, dropping to $0.93. This doesn't look too optimistic, and it may cause another huge crash in the market. This may also cause the end of stablecoin staking.

Yes, There is no comparison between UST and the USDC. Basically one of the reasons for the collapse of Silicon Valley banks in the US could be the reduction of the peg of this scalable coin. USDC stablecoin is currently the second-largest stablecoin by market cap. It is currently trading at $0.986463. But this kind of situation is not new in stable coins. Gradually it is returning to normal levels again.

[jossiel]

...there's some positive news that's been released about SVB, Silvergate, etc. and that might be the reason for the market's up today.

After the Federal Reserve Board announced that "make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors" - https://www.federalreserve.gov/newsevents/pressreleases/monetary20230312a.htm, the cryptocurrency market began to move up. So we can assume that the value of USDC will be restored already on Monday.

Yeah, it's again back to $0.99 so that's like the usual price of a stablecoin ranging with the difference of an actual $1 to $0.99 and we can say that they're back and normal.

So if the owners of stable coins are relying on financial institutions to safeguard their funds then sooner or later this will happen again, and this will erode the confidence investors have on stable coins even further.

Well, stablecoin owners have nowhere and no other thing to rely on but the providers of those issued coins. And that's why they've got no choice and whatever happens to the issuer or company that backs it, they can do nothing.

[Hispo]

Fortunately, it seems both USDC and DAI have almost recovered their peg to the USA dollar, otherwise the ecosystems which depend on both coins stability would be in huge problems. I hope the guys at MakerDao learn from this event and get swap most of their USDC and use Ethereum as over-collateral for DAI.

imagine if usdc said they were backing it up using ethereum.   that's kind of like cheating right? you can't backup something pegged to the us dollar with some fluctuating cryptocurrency. not really.

I would like to inform you that, actually DAI (which is a stablecoin) was 100% backed by Ethereum for years, before it moved onto a multi-collateral backing.

It is called over-collateral. What they do is to ask you a 150% of collateral to give you 100% of the value of it in DAI, so if the market fluctuations won't affect the peg to the USD.

If the price decreases under 1$, there are over 50% of wealth, which is used to held the value.
If the price increases over 1$, the person which deposited the Ether is given the option to mint more DAI from their collateral.

It was a very clever system, imo.