The collapse of SVB is it the one that caused market-wide consequences for Circle USDC?
Several times, I always admit that exposure in crypto space is a chained exposure, meaning that if one collapses it immediately drags others. The crypto market has suffered a lot from these mishaps lately, and it all started with the collapse of TerraUSD, when the UST 1-1 dollar peg depeg and affected several projects in the crypto industry, especially Three Arrows Capital, which gets more exposure to the UST stablecoin.
The collapse of 3AC results in the folding of some crypto companies that have one or two relationships with the operation, this results in a tough environment that Voyager is going through, also the Digital Currency Group (DCG) parent to Genesis loses $1 billion and more.
Apart from 3AC, the FTX contagion that affect many crypto companies, which were exposed to the collapse of FTX and spread it to others who had a relationship with them. The crypto-friendly bank gets exposure to FTX and spread it to others.
I recently brought to your attention that Circle has announced that it will increase its headcount by 15% to 25%. I said something about "Circle is doing it differently despite the tough times when everyone is downsizing their workforce. ReadMore
But the collapse of Silicon Valley Bank (SVB), a crypto-friendly commercial bank, changes everything for Circle. It has been confirmed that Circle has $3.3 billion of its $40 billion USDC reserves in SVB, and Circle's attempt to withdraw on March 9 was unsuccessful. The USDC issuer also has another 20% of its reserves in Silvergate, the new bank that was closed.
This really caused a big reaction around the stability of USDC, while the volatility of cryptocurrencies was what made many investors to make stablecoins as their investment options, and now the cryptocurrency sector has problems with stablecoins.
Before it was Tether, now USDC, even recent regulators forced Paxos to stop issuing BUSD, Binance Stablecoins that it was security and that caused BUSD to lose more than 50% of its cap. Canada's regulations also ended trading of stablecoins in the country arguing that most are not stable, so anyone who wants to stay in business should seek with the government before investing in stablecoins.
After the USDC depeg, the crypto market is down 8% from $1 trillion. USDC are trading below $0.88 and a major cryptocurrency project is suffering from this low. The USDC now put pressure on investors to find a way to keep their money. But I think this will be different than TerraUSD as Circle has made it clear that there is still some reserve left to solve the problem and allow the market to recover from the downward trend caused by USDC.
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