The abrupt collapse of Silicon Valley Bank has hurt the value of the world’s fifth-largest cryptocurrency, raising fears of a potential ripple effect among Web3 companies. On Saturday morning, USD Coin fell to an all-time low of $0.87 after Circle, the company that runs the stablecoin, revealed that $3.3 billion of the roughly $10 billion in cash reserves backing USDC were in the hands of SVB.
As The Guardian notes, the drop is unprecedented. As a stablecoin, USDC’s value is supposed to remain stable thanks to its peg to the US dollar. According to data from CoinGecko, USDC’s previous all-time low was around $0.97 in 2018. More recently, the coin fell to $0.99 following the Three Arrows Capital collapse. At the time of writing, the USDC is valued at approximately $0.95 cents.
previously people argued that USDC had only lost its peg on the shallower exchanges (kraken, gemini)
down almost everywhere now. It’s going to be a tough weekend I think. pic.twitter.com/4BCW6Lael9
— Molly White @ SXSW (@molly0xFFF) March 11, 2023
Web3 is just great creator Molly White suggests that the effect of a sustained USDC decline would be “enormous.” A handful of other stablecoins, including FRAX and DAI, use USDC as collateral. Friday, Circle saying “It would continue to operate as normal” while it awaits more information on what will happen to SVB customers. “As of Thursday, we had initiated transfers of these funds to other banking partners. Although these transfers had not yet settled as of Friday’s close of business, we remain confident in the FDIC’s handling of SVB’s situation and stand ready to receive these funds,” Circle said Saturday, adding that $5.4 billion of its cash assets are held by BNY Mellon, “one of the largest and most stable financial institutions in the world.”
