As Circle, the U.S. company behind the currency, disclosed that part of the reserves sustaining it were stored at Silicon Valley Bank, Stablecoin USD Coin (USDC) lost its dollar peg and fell to an all-time low on Saturday.
Circle stated in a tweet on Friday that Silicon Valley Bank, a failed institution, had $3.3 billion of its $40 billion in USDC reserves.
According to market watcher CoinGecko, the currency lost its 1:1 dollar peg and dropped as low as $0.88 on Saturday just after 8:00 GMT. At 11:20 GMT, it had marginally rebounded to trade around $0.90.
The greatest U.S. bank failure since the 2008 financial crisis, Silicon Valley Bank’s fall on Friday shook up the world markets and left investors and businesses holding billions of dollars in the lurch.
In a tweet on Friday, Circle stated that it and USDC “continue to function properly” as the company waits for clarification on what will happen to depositors of Silicon Valley Bank.
A request for a remark about the dollar peg that was made outside of American working hours did not receive a prompt response from Circle.
A 1:1 U.S. dollar peg is one method used by stablecoins to maintain a steady exchange rate with “fiat” currencies, which are backed by the government rather than a tangible good like gold.
They are used in cryptocurrency trading, and their value has increased recently. The market valuation of USDC, the second-largest stablecoin, is $37 billion. According to CoinGecko, the largest, Tether, has a market worth of $72 billion.
The price of USDC typically hovers around $1, thus Saturday’s decline was unheard of. Data from CoinGecko indicates that its previous all-time low was about $0.97 in 2018, but in 2022, when the cryptocurrency markets were shaken by the failure of crypto hedge firm Three Arrows Capital, it dropped just below $0.99.
The struggles of Silicon Valley Bank and the cryptocurrency-focused Silvergate, which this week reported intentions to wind down operations and voluntarily liquidate, have caused traders to be on high alert this week for indications of contagion in the banking industry and beyond.
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