The USDC was hit by a bearish wave after the news of the collapse of Silicon Valley Bank on March 11th. Stablecoin issuer Circle revealed it had $3.3 billion in deposits at the defunct bank, adding to the uncertainty surrounding USDC.
USDC price drops below $0.90 for the first time
With doubts about USDC reserves, the coin’s price has fallen to a 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 influx of volume in the last 24 hours, which is not surprising. The collapse of Terra USD (UST) in May 2022 served as a warning to many cryptocurrency holders who do not want to go through a similar situation with USDC.
Related reading: USDC issuer circuit reveals it was unable to withdraw $3.3 billion from Silicon Valley bank
Meanwhile, Circle tried to reassure USDC holders by assuring them that their funds were safe. U tweet On March 11, Circle revealed that Silicon Valley Bank is one of six banking partners it uses to manage 25% of USDC reserves held in cash. He further added that clarity is awaited from the FDIC on how SVB’s insolvency will affect depositors.
However, several crypto firms have limited their exposure to USDC. Binance has announced that it will temporarily suspend its automatic conversion of USDC to BUSD. Coinbase followed suit by pausing USDC to USD conversion until Monday. The exchange stated that during the increased conversion activities, they rely on USD bank transfers made during business hours.
The DAO maker also approved an emergency proposal to reduce the USDC collateral of its DAI stablecoin. It has been decided that the debt ceiling of several liquidity pools, including USDC, will be lowered to zero DAI, meaning that they cannot continue issuing new coins. Additionally, in what they call “stability modules” exposed to the USDC, the daily issuance limit of 950 million DAI will be reduced to just 250 million.
Related reading: USDC Holder Forks Over $2M for 0.05 USDT in Desperate Move to Avoid Crypto Crash
What next for USDC
At the time of writing, the USDC price has recovered 3% in the last 24 hours and is trading at $0.9552. However, the 24-hour trading volume decreased by 31% to $14 million, while the total market capitalization is around $38 billion.
Current crypto market sentiment is mixed, with some people pointing out the problems of centralizing stablecoins. Likewise, some are trying to take advantage of this situation to get USDC at a discount. They believe the USDC will regain its peg to the dollar and can profit from the current range. As can be seen, opinions differ, and it remains to be seen how the stablecoin will behave in the coming days.
Featured image from Canva.com, chart from CoinmarketCap.com.