USDC depeg – Everything we know so far as contagion spreads from TradFi banking

What we know so far about the SVB collapse and USDC/DAI depeg (update):

• Crypto Firm Circle Reveals $3.3 Billion Stuck in SVB
• DAI/USDC Unpegs As Stablecoin Pressure Continues After Silicon Valley Bank Collapse
• binance pause USDC conversion due to volatile market conditions
• coin base pause USDC Conversion “For Weekends When Banks Are Closed”
• SVB contagion: BlockFi, Circle, Avalanche and other crypto companies hit hard
• Net redemptions reach $1 billion since SVB collapse
• MakerDAO’s decentralized stablecoin, DAI, hit an all-time low at 0.88 cents during the afternoon hours in Asia on Saturday, March 11th.
• The contagion is believed to be part of Operation Chokepoint, a remnant of Obama-era Justice Department policy
• Stablecoin USDT Tether briefly surges on news that it is not affected by SVB

TradFi banking contagion

The day after West Coast bank Silicon Valley Bank (SVB) was placed under federal control and both deposits and withdrawals were suspended, circle, the issuer of stablecoin USDC, lost its $1.00 peg to the US dollar. , caused fear of execution. In a stablecoin similar to what happened when UST scaled back after being unpegged from Terra Luna.

Overnight, USDC dropped 1.00 cents to 14 cents to 0.86 cents.

“$3.3 billion of USDC’s $40 billion reserves remain in the SVB after it was confirmed at the end of the day that a wire transfer initiated Thursday to remove the balance had not yet been processed.” said Circle. Tweet.

“Like other customers and depositors who rely on SVB for their banking services, Circle joins the call for the continuation of this important bank in the U.S. economy and follows the guidance provided by state and federal regulators.”

The news follows concerns that contagion from the SVB collapse could affect other cryptocurrency institutions, with both BlockFi and Avalanche revealing ties to failed banks. .

The news has sparked renewed concern that the on/off ramp of fiat cryptocurrencies could become a “chokepoint” for governments. the goal The entire crypto industry.

Twitter reaction

See below pic.twitter.com/Cm72Ec854S

— Beeple (@Beeple) March 10, 2023

CZ took to twitter Speculating whether it’s time for exchanges like Binance to start buying distressed banks.

A leveraged position is opened

Some traders buy USDC in anticipation of a potential 10% profit if the token returns to its intended dollar mark. These traders are betting on this gradual recovery to $1 as the USDC price is relatively low. Leverage can potentially amplify returns for these traders, as evidenced by Bybit’s futures funding rate, which reached 0.3% on Saturday morning.

$114,000 open $USDC Long at $0.87

Alright, let’s go.

You know shit is hitting the fence when you’re ref trading ‘stable’ coins 🤡 https://t.co/TPEUbfM80b pic.twitter.com/Yl3KnGBlXf

— Defi_Maestro 🫐 (@Defi_Maestro) March 11, 2023