Key points to remember
- Circle’s USDC is trading again for $1.
- The stablecoin broke its peg Friday night after Circle revealed it had exposure to Silicon Valley Bank.
- The US government stepped in to ensure that all SVB depositors would be cured.
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After breaking its peg over the weekend and trading as low as $0.87, Circle’s USDC stablecoin is now at $1 again.
1USDC for $0.87
All eyes are on USDC as the banking crisis rages on.
Circle’s USDC regained its peg at $1 earlier today after a tumultuous weekend that saw the second-largest stablecoin by market capitalization fall to $0.87.
Stablecoins are cryptocurrencies designed to stay at par with a government-issued currency, such as the US dollar or Euro. In the case of USDC, parity is achieved and maintained by backing each token with 1:1 dollar reserves.
However, Circle disclosed late Friday that, of its $40 billion in reserves, $3.3 billion remained tied up at Silicon Valley Bank. Silicon Valley Bank experienced a bank run soon after announcing Wednesday that it was taking extraordinary and immediate steps to shore up its finances, including selling $21 billion of its most liquid assets, borrowing $15 billion and raising funds by staging a fire sale of its shares . The FDIC forced the bank to close on Friday.
Circle’s disclosure – compounded by the company’s inability to directly redeem USDC over the weekend due to banking system working hours – sent USDC plummeting to $0.87, per Coingecko Data. However, Circle CEO Jeremy Allaire took to Twitter on Saturday to assure that the company would indeed be repurchasing USDC tokens on a 1:1 basis on Monday morning as usual. The statement helped USDC rebound to $0.94.
The USDC fully regained its footing shortly after the US government announced it would take action to ensure that all Silicon Valley Bank depositors were cured. Allaire responded to the news by saying Circle would transfer all of its remaining Silicon Valley Bank deposits to BNY Mellon, another Circle banking partner.
Disclosure: At the time of writing this article, the author of this article owned BTC, ETH, and several other crypto assets.