The sudden collapse of the US-based Silicon Valley Bank (SVB) is generating tremors in the US stock market. Regulators shut down SVB due to the sudden downfall of Silvergate Capital Corp on Friday. The fallout may have an impact on the crypto sector.
Circle, the issuer of the second largest stablecoin USDC, was affected during the SVB shutdown late Friday. Investors and traders are moving out of USDC after Silicon Valley Bank’s and Silvergate Bank’s downfall. Circle said on Friday that $3.3 billion in cash deposits remained at SVB. Since Friday morning, most USDC investors redeemed around $1 billion worth of tokens, resulting in an imbalanced firm.
“Silicon Valley Bank is one of six banking partners Circle uses for managing the approximately 25% portion of USDC reserves held in cash. While we await clarity on how the FDIC receivership of SVB will impact its depositors, Circle and USDC continue to operate normally,” Circle spokesperson said on Friday.
According to Circle’s January attestation report, it held around $9.88 billion in capital at regulated financial institutions to back its stablecoin price. The cash was held at banks including New York Community Bank, Signature Bank, Silvergate Bank, Customers Bank, New York Community Bank and Silicon Valley Bank. According to Coingecko data USDC fell to $42.3 billion on Friday from $45.6 billion. Currently, USDC is losing its dollar peg on some crypto exchanges trading at $0.92, down by 7.69% at press time.
As of January 17, USDC held some of its capital as SVB traders were afraid to hold their assets, so they decided to sell them. USDT’s market share among stablecoins surpassed 54% earlier this week. At the time of writing, Circle tweeted that “Like other customers and depositors who relied on SVB for banking services, Circle joins calls for continuity of this important bank in the US economy and will follow the guidance provided by state and Federal regulators.”
Silvergate Bank went belly-up on March 8. The Bank, which served as one of the two major banks for crypto firms, along with Signature Bank, with $114 billion, decided to discontinue its crypto payment network. On March 10, 7.59 pm GMT, Silvergate Capital (SI) market closed at $2.52, down by 11.27%.
Silicon Valley Bank said it sold $21 billion worth of holdings at a $1.8 billion loss, affecting the US stock market as well as the crypto industry. The largest cryptocurrency by market capitalization, Bitcoin fell to $20,000, down by 1.24% at press time. Ethereum is trading at $1,464, down by 0.06% in the past 24 hours. According to CNBC, the crypto market experienced around $70 billion wiped off its value over the past 24 hours.
The S&P 500 was down by 1.45% on March 10. Financial institutions like JPMorgan Chase and Bank of America showed a mixed performance on Friday.
Disclaimer
The views and opinions stated by the author, or any people named in this article, are for informational purposes only and do not establish financial, investment, or other advice. Investing in or trading crypto assets comes with a risk of financial loss.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while his post-graduation. He is a keen observer of details and shares his passion for writing along with being a developer. His backend knowledge about blockchain helps him give a unique perspective to his writing
Source: https://www.thecoinrepublic.com/2023/03/11/traders-are-moving-out-of-usdc-after-silicon-valley-bank-shutdown/