The whole banking realm has been under various concerns since 2023. With Silvergate shutting down and the recent Silicon Valley Bank issues, the banking realm has seen it all. However, this series of events also had repercussions in the cryptocurrency realm.
The Silicon Valley Bank was recently shut down by California regulators. It all began when a series of issues surfaced regarding the bank’s struggle to raise capital. This inability slowly turned into an effect when the bank was considering its sale. However, the slew of events has now led to the bank’s closure.
Amidst all the chaos, Circle (USDC) has definitely come under the spotlight, but not all for positive reasons. With reports surfacing that Circle held an undisclosed amount of cash in the SVB, the reports were confirmed by the stablecoin issuer.
Circle (USDC) falls prey to the banking realm chaos
Following the revelation, USDC was gravely affected, as it was confirmed that $3.3 billion of the USDC reserves are in the SVB.
Circle also addressed in the tweet:
“Like other customers and depositors who relied on SVB for banking services, Circle joins calls for continuity of this important bank in the U.S. economy and will follow guidance provided by state and Federal regulators.”
USDC, which is meant to maintain its peg despite market conditions, went downhill. The price of the stablecoin depegged and fell initially to $0.95, then to $0.90, and currently stands at $0.9049, with a 9.51% drop in value over the last 24 hours. The price dropped to $0.8774 before it gained momentum. CoinMarketCap data also reveals that the 24-hour trading volume has also spiked by 379%.
Due to ongoing issues, exchanges like Coinbase have announced that USDC to USD conversions will be temporarily paused. The exchange cited that this is due to the closure of banks over the weekend and due to the heightened activity. The bank also ensured to resume conversions on Monday.
Robinhood also followed suit to suspend USDC trading deposits as there is heightened trading activity due to the ongoing Circle drama. CZ’s exchange Binance also decided to temporarily suspend the auto-conversion of USDC to BUSD, citing high inflows and market conditions. Binance stated this as a normal risk-management strategy.
The market, which was in a bloodbath following the collapse of Silvergate, is slightly trading in the green. However, analysts suggest that this is just temporary, as the USDC event has triggered the cryptocurrency community and the market.