Are You Taking Risk With Stablecoins?
People usually do trading using stablecoins. In a bull market, many people sell their crypto and hold stablecoin to take entry in the crypto market later. In a bear market, the whole crypto market goes down. Having stablecoins seems the safest option. But are you sure that you are not taking any risk with stablecoins?
Recently the most popular and trusted stablecoin USDC depegged and created panic in the market. Many people sold their USDC to shift to other stablecoins and cryptos. USDC that is supposed to be equal to $1 went down to $0.87. Stablecoin Dai also lost its peg at that time. That's very scary.
People saw how UST lost its peg and turned into dust. They do not want to lose everything as they did in UST. UST was an algorithmic stablecoin. On the other hand, USDC is a fiat-backed stablecoin. People have more trust in fiat-backed stablecoin because they saw the collapse of LUNA and UST.
USDC issuer Circle only has $3.3 billion in Silicon Valley Bank and that created all this mess. Investors who had a huge amount of money in USDC faced a challenging situation. It was like the sooner they could get out of USDC, the better. They tried every possible way to sell USDC at that time to avoid losses. There is news that someone swapped more than over 2.08 million USDC and received only $ 0.05 USDT.
The situation could get worse but the Federal Deposit Insurance Corporation (FDIC) stepped in and assured of taking care of what happened at Silicon Valley Bank. I think more bank runs would trigger if they did not take any steps to handle the situation.
It shows how secure your money is in a bank. If people cannot trust the banks and everyone rushes to the bank to withdraw their money, the same situation will repeat. Crypto is a good alternative to building wealth. Living in this time, we should consider that seriously.
People can explain the crypto market in different ways about whether we are still in a bear market or not. I do think the crypto market has changed its trends. All crypto prices would not go up straight. Bitcoin shows its dominance, but the altcoins price does not move much. What I am sharing is my opinion, not financial advice.
You cannot think that you have stablecoins and you have nothing to worry about. We need to adapt and change based on the market situation.
Image Sources: 1, and 2. Reference: 1.
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Hi, I am Rezoanul Vibes. I'm a content creator and passionate learner. I write about finance, cryptocurrency, and lifestyle.
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