Crypto investors have flocked to redeem their USD Coin (USDC) holdings after its issuer Circle revealed it held $3.3 billion of its reserves at the failed Silicon Valley Bank (SVB).
Concerns about USDC’s reserves emerged after U.S. regulators took control of the bank. The stablecoin issuer confirmed it had exposure to the institution, leading to massive withdrawals from the platform.
Circle said its attempt to remove its balances from SVB on March 9 was not processed until it was closed by the authorities on March 10.
USDC Market Cap Shed $6B in 24 Hours
USDC’s market cap has lost around $6 billion within the last 24 hours as crypto investors turn to rival stablecoins. According to BeInCrypto’s data, USDC’s market cap fell to $36.9 billion from $43.37 billion.
Blockchain analytical firm Peckshield tweeted that Circle burnt 2.7 billion USDC within 24 hours. Nansen corroborated the report, adding that 70% of these burns were made in the last 8 hours.
A look at Curve’s 3pool dashboard shows that investors prefer USDT and DAI over USDC. According to the data, USDT accounts for 1.57% of the reserve, while DAI makes up 21.94%. The 76.48% balance belongs to USDC as of press time.
Source: Curve 3Pool
USDC Loses $1 Peg
Meanwhile, the concerns about the stablecoin reserves have seen it depeg against its rivals. BeInCrypto data showed that the stablecoin tanked 10% following the news to $0.90 as of press time.
USDC Chart Source: BeInCrypto
Top crypto exchanges Binance and Coinbase said they would suspend USDC’s conversion, citing “market conditions.” Binance said the move was a “normal risk-management procedural step to take.” Coinbase also suspended the stablecoin’s conversion over the weekend. The U.S.-based exchange plans to recommence the conversion on Monday when banks open.
Meanwhile, Circle’s chief strategy officer and head of global policy, Dante Disparte, said the issuer tried to protect the stablecoin “from a black swan failure in the U.S. banking system.” According to him, the principal balance of USDC reserves is held in the Circle Reserve Fund – 80% short-dated U.S. treasuries – and across other U.S. banks.
Disparte added that “as with Silvergate, our teams have worked at speed to limit any exposure to banks. This includes a wire transfer request made before SVB’s FDIC receivership. A $3.3 billion cash exposure remains – but we follow state and Federal regulatory guidance.”
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