The USDC has been hit by a bearish wave after news of the collapse of Silicon Valley Bank on March 11. The circle of stablecoin issuers has announced that there are $3.3 billion in deposits with defunct banks, contributing to the uncertainty surrounding the USDC.
USDC Price Falls Below $0.90 For The First Time
Due to doubts about USDC reserves, the price of the coin fell to $0.8774, according to data from CoinMarketCap. Onchain data reveals that investors are shedding USDC holdings for other assets.
Rival stablecoin USDT has received significant volume flows in the past 24 hours, which is not surprising. The collapse of Terra USD (UST) in May 2022 has been a cautionary tale for many crypto holders who do not want to experience the same situation as USDC.
Related reading: USDC Issuer Circle Says It Can’t Withdraw $3.3 Billion From Silicon Valley Bank
Meanwhile, Circle has tried to reassure USDC holders by assuring them that their funds are safe. At tweet on March 11, Circle revealed that Silicon Valley Bank is one of the six banking partners used to manage 25% of USDC reserves held in cash. Additionally, they are awaiting clarity from the FDIC on how SVB’s bankruptcy will affect depositors.
However, some crypto companies have limited their exposure to USDC. Binance announced that it will suspend the automatic conversion of USDC to BUSD. Coinbase followed suit by pausing USDC to USD conversions until Monday. The exchange notes that during higher activity, conversion depends on USD transfers from banks completed during banking hours.
The DAO maker also approved an emergency proposal to reduce USDC collateral from the stablecoin DAI. It was decided that the debt ceiling of some liquidity pools, including USDC, will be reduced to zero DAI, which means that they can not continue to issue new coins. In addition, in the so-called “stability module” seen in the USDC, the daily issuance limit of 950 million DAI will be reduced to only 250 million.
Related reading: USDC Holders Forks Over $2 Million To $0.05 USDT In Desperate Move To Avoid Crypto Crash
What’s Next For USDC
At the time of writing, the USDC price has recovered 3% in the past 24 hours and is trading at $0.9552. However, the 24-hour trading volume has decreased by 31% to $14 million, while the total market capitalization is approximately $38 billion.
Crypto market sentiment is currently mixed, with some highlighting the issue of stablecoin centralization. In addition, some seek to take advantage of this situation to get USDC at a discount. He believes that the USDC will return to the dollar, and can profit from the current spread. As can be seen, opinions differ, and it remains to be seen how the stablecoin will perform in the coming days.
Featured image from Canva.com, chart from CoinmarketCap.com.