USDC has been hit with a bearish wave following news of the collapse of Silicon Valley Bank on March 11. The stablecoin issuer Circle had revealed that it had $3.3 billion in deposits with the defunct bank, contributing to uncertainty regarding USDC.
USDC Price Falls Below $0.90 For The First Time
Given the doubts about the reserves of USDC, the coin’s price fell to an all-time low of $0.8774, according to data from CoinMarketCap. Onchain data reveals that investors are liquidating their USDC holdings for other assets.
Rival stablecoin USDT has received a significant inflow of volumes in the past 24 hours, which is unsurprising. The collapse of Terra USD (UST) in May 2022 has served as a cautionary tale for many crypto holders who do not want to go through a similar situation with USDC.
Related Reading: USDC Issuer Circle Reveals It Couldn’t Withdraw $3.3 Billion From Silicon Valley Bank
Meanwhile, Circle has tried calming USDC holders by assuring them that their funds remain safe. In a tweet on March 11, Circle revealed that Silicon Valley Bank was one of the six banking partners that it uses to manage 25% of USDC reserves held in cash. It further added that it was awaiting clarity from FDIC regarding how SVB insolvency would affect depositors.
Nevertheless, several crypto firms have limited their exposure to USDC. Binance announced that they would temporarily suspend their auto-conversion of USDC to BUSD. Coinbase followed suit by pausing USDC conversion to USD until Monday. The exchange noted that during heightened activities, conversions rely on USD transfers from banks completed during banking hours.
Maker DAO also approved an emergency proposal to reduce the USDC collateral of its DAI stablecoin. It was decided that the debt ceiling of several liquidity pools, including USDC, will be lowered to zero DAI, which means that they cannot continue issuing new coins. In addition, in what they call “stability modules” exposed to USDC, the daily issuance limit of 950 million DAI will be reduced to only 250 million.
Related Reading: USDC Holder Forks Over $2 Million For $0.05 USDT In Desperate Move To Evade Crypto Crash
What Next For USDC
At the time of writing, USDC price has recovered by 3% in the past 24 hours and is trading at $0.9552. However, the 24-hour trading volume has reduced by 31% to $14 million, while the total marketcap is about $38 billion.
The current crypto market sentiment is mixed, with some people highlighting the problems of the centralization of stablecoins. Likewise, some seek to take advantage of this situation to get USDC at a discount. They believe that USDC will return its peg to the dollar, and they can profit from the current spread. As can be seen, opinions are diverse, and it remains to be seen how the stablecoin will fare in the coming days.
Featured image from Canva.com, chart from CoinmarketCap.com.