What happened, USDC?
Intending to create a good, year-round stablecoin in 2018, Circle and Coinbase launched USDC. This coin was backed by the U.S. dollar until it fell to a historic low on Saturday morning. USDC was supposed to stand at $1 but fell 14% below 86 b on the same day.
The day before, on Friday, regulators announced the closure of Silicon Valley Bank (SVB) and the transfer of its assets to the control of the Federal Deposit Insurance Corporation (FDIC). This was the bank’s largest bankruptcy since 2008.
The collapse of the Silicon Valley Bank, which has been spreading since Thursday, caused panic and a domino effect – one after another, problems began to appear in projects related to the bank. Soon, there was news about it online: some crypto exchanges denied their cooperation with SVB, while other companies wrote that they were trying to keep “everything under control.”
People realized that the cash portion of the USDC bailout was in ill-fated bank accounts and that all the money might not be enough. The banks dumped the USDC in large quantities to save money in favor of any other asset. Due to insufficient reserves to convert USDC into U.S. dollars, there was a “devaluation” on the exchange over the weekend – the USDC exchange rate dropped 14%.
On Monday, Circle issued hundreds of millions of dollars worth of UDSC coin to get the second-largest stablecoin by market capitalization back on track after its recent “decoupling” from the dollar. The move was apparently made to restore investor confidence in the company.
Stablecoin has since regained its peg and is worth $0.998 at the time of writing.