Major cryptocurrencies stabilized on Monday after US authorities announced plans to limit the fallout from the failure of Silicon Valley Bank (SVB) and the “stablecoin” issuer. USD Coin said that it was still exchangeable with the dollar.
US authorities launched emergency measures on Sunday to shore up confidence in the banking system after the bankruptcy of the SVB threatened to unleash a financial crisis and said the bank’s clients would have access to their deposits from Monday.
USD Coin, also known as USDC, was recovering to $0.9917 from the all-time low of $0.87 hit on Saturday, well below its expected 1:1 parity against the dollar. The drop was due to concerns about the SVB exposure of Circle, the US company that issues USDC.
For its part, bitcoin fell 0.3% to $22,125, but continued to accumulate a rise of close to 8% from Sunday’s lows.
Jeremy Allaire, Circle’s chief executive, said in a tweet on Sunday that the company’s $3.3 billion USDC reserve deposit – about 8% of its total – held at the collapsed SVB Bank would be fully available when banks Americans open on Monday.
Learn more – HSBC to the rescue: bought the UK headquarters of the SVB for £1
Stablecoins like USDC, the second largest by market size, are a crucial cog in the world of cryptocurrency trading. They are designed to maintain a stable value and are usually backed by reserves of traditional assets such as dollars, bonds, or gold.
Stocks exposed to cryptocurrency also rose.
In pre-open trading for the US markets, cryptocurrency miners Riot Blockchain and Marathon Digital, cryptocurrency exchange Coinbase Global and software developer MicroStrategy Inc also rallied from last week’s lows to gain between 6 ,5% and 10%.
The DAI Crash
USD Coin (USDC), the second largest stablecoin by market capitalization, fell below its expected price of $1 after Circle, its issuing firm, revealed that it held part of its reserves at failed Silicon Valley Bank. .
USDC issuers said Friday afternoon they had an unspecified amount of money on deposit with Silicon Valley Bank (SVB), a major California-based bank that was shut down earlier in the day by regulators. Circle specified shortly after that the amount of reserves in the bank’s custody was $3.3 billion.
The company said in a tweet on Saturday to early morning (GMT-3) that it had been unable to withdraw its funds from the bank, which represent just over 8% of USDC’s $40 billion in reserves.
The revelation of Circle raised fears among investors, who rushed to change their USDC for other assets. The currency, which is expected to maintain a 1-to-1 price parity with the US dollar, plunged to a record low of $0.87 on Saturday.
A few minutes later, several cryptocurrency exchanges, including Coinbase and Binance, announced the temporary halt of USDC conversions due to market conditions and high activity flows. However, the market is expected to stabilize in the next few hours.
Source: Ambito
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