Over the weekend, stablecoin UCD Coin (USDC) lost its peg to the US Dollar and slumped to an all-time low of $0.88 before then recovering most of its losses. The coin’s temporary downfall occurred following the demise of Silicon Valley Bank over the weekend, where Circle, the firm behind USD Coin, has $3.3 billion of the $40 billion backing its stablecoin. The rebound occurred after the firm announced that it would cover any shortfall in the event that the bank did not return 100% of deposits by using corporate resources. USDC is a big player in the crypto market, as it is the second-biggest stablecoin by market cap after Tether; therefore, it is unsurprising that the complicated situation over the weekend was called “extremely serious” by some experts, including advisors at Enigma Securities.
In addition to USDC, the entire crypto market was hit by Silicon Valley Bank’s free fall. Bitcoin and Ethereum were also hit, but, much like USDC, rebounded fast, probably due to the fact that the Treasury Department and Federal Reserve announced Sunday that the bank’s deposits would be protected after it failed. Silicon Valley Bank’s downfall started as it was forced to sell government bonds it had bought in previous years at a loss to cover a surge of withdrawal rates, as the bond’s value had fallen following the Fed’s increase in interest rates. It has therefore been a difficult couple of weeks for global markets, as Silvergate’s gradual liquidation and SVB’s downfall have also hit crypto rates, which have, at least for now, managed to stay the ship.
