Traders Dump USDC After Silicon Valley Bank and Silvergate Fail

Despite previous bullish movements, market conditions failed to retain them due to a sudden major problem in USDC coin and Silicon Valley Bank (SVB).

As you’ve observed, all concerned markets are currently on a downtrend because of the recent shocking issue circulating SVB.

And this didn’t only negatively affect the bank itself, but also other companies that were tied up, notably Circle – The company that controls the shoulders of USDC.

In this article, we will cover everything that’s need to know about the market’s downfall. 

THE ALPHA (TRADERS)

Crypto whales face massive losses in their portfolio after the USDC coin’s price fell to an all-time low of $0.88.

Its continuous price downtrend happened last Saturday and has worried many big-time investors ever since.

Because of this issue, USDC holders and traders made a series of swap transactions to protect their assets and regain the value of their investments. 

Unfortunately, most of them were unsuccessful. Du Jun, the co-founder of cryptocurrency exchange Huobi Global, stated:

DETAILS ABOUT THE SILICON VALLEY BANK

Silicon Valley Bank was a prominent bank of choice for most technology and healthcare start-ups because of lending opportunities.

However, the bank discovered a major fraud scheme in their system that involved one of their senior executives as a suspect. 

The scheme resulted in over a billion dollar loss, which triggered depositors and creditors to withdraw their money amidst fear of loss. 

SVB tried to raise capital from other shareholders but failed to gain enough to make ends meet.

As a result, regulators closed down the bank and got handled over to the US Federal Deposit Insurance Corporation. 

A BACKGROUND OF USDC’S COLLAPSE

For context, USDC coin is a stablecoin, a cryptocurrency that’s supposedly meant to maintain an equivalent 1:1 price ratio with the US Dollar. 

But its concept was suddenly falsified after several investors made panic USDC withdrawals mainly due to Silicon Valley Bank’s problem. 

As a result, companies backing USDC, such as Circle and Silvergate, faced significant problems, which caused further panic bank runs. 

CIRCLE AND SILVERGATE’S RELEVANCE TO THE PROBLEM

Circle, the company that issues USDC, revealed that many USDC reserves are in Silicon Valley Bank. 

Moreover, Silvergate is also one of the banks backed by Circle to hold another portion of its USDC reserves. 

However, Silvergate announced it was undergoing liquidity problems and had to suspend operations.

This became possible right after SVB’s closure. Therefore, it caused further panic among investors and traders, which made them withdraw their USDC deposits. 

All of these problematic series of withdrawals and events led the stock market to crash, along with cryptocurrency’s USDC.

WHAT’S NEXT

The future of USDC coin is uncertain as of now, since the issue is still a developing story. 

And aside from its current progress, there are also factors that people need to consider, such as:

• Transparency of Circle

• Reoperations of Silvergate

• And lastly, possible recovery or workarounds around SVB’s issues.

Although it’s still uncertain, Alex Svanevik, CEO of blockchain analytics firm Nansen, assumed that Circle and USDC “can make it.“

However, he also warns that Circle needs “top-class execution over the next few days,” including “flawless redemptions,“ and silence for “bailouts publicity.“

CONCLUSION

Fortunately, the price of USDC is slowly heading back to its original value at the time of writing.

But investors and traders still need to wait for reasonable and fair results regarding their losses.

Given the market’s and investors’ conditions, it might take time, as conclusive statements are yet to arrive.

In the meantime, what do you think about this update?