Financial markets are undeniably sensitive to the news regardless of whether it is company or industry-specific. The cryptocurrency market being the nascent one among all the economic sectors also prone to get affected by the news. In the past week, several instances took place that were intense enough to tremble the crypto market. Three prominent banking institutions, Silvergate Capital, Silicon Valley Bank (SVB), and Signature Bank, collapsed consequently.
Among some of the major impacts on the broader crypto market, the impact on Circle’s stablecoin USD Coin (USDC) remained in the mainstream conversations. USDC stablecoin which was meant to peg its value with the USD lost its backing and hit its all-time low within a single day. In a matter of hours, USDC dropped from its ideal amount of 1 USD to its lowest point of 0.883 USD on Saturday, March 11, 2023, according to the CoinMarketCap data.
Prominent stablecoin suffered a decline in the wake of its connection with the recently fallen tech and start-up-focused Silicon Valley Bank. In a Tweet on Friday, Circle stated that out of its 40 billion USD worth of USDC reserves, 3.3 billion USD was with SVB.
In a blog post, Circle clarified that the liquidity operations of stablecoin will continue to work normally with the banks working to their normalcy by Monday. Later the falling peg value of USDC recovered as the stablecoin issuer assured its investors that the stablecoin peg will be secured regardless of the exposure to the California-based bank.
In addition, the company said that if it turns out that the bank would not return overall deposits, it will use its corporate resources like external funds if there is a shortfall situation.
However, on Monday, the US financial regulators took control of the situation, which turned the winds and brought a bit of optimism within the markets. Cryptocurrencies that were falling in their values were in the green zone. Bitcoin and Ethereum rose to 7% within 24 hours, and global cryptocurrency market capitalization crossed 1.01 trillion USD.
Silicon Valley Bank’s collapse came as one of the largest bank failures in the United States since the financial crisis of 2008. Once known as ‘the Mecca of start-ups,’ fell into the trap of a deposit run which resulted in its devastated end.
SVB isn’t the only one, whereas prominent crypto-friendly banks Silverware and Signature met a similar fate in the past few days. These instances altogether left a massive void within the crypto space that will await filling in.
Source: https://www.thecoinrepublic.com/2023/03/14/usdc-struggled-to-maintain-peg-amid-silicon-valley-bank-fiasco/