Over the last couple of days, the downfall of several financial institutions like banks took a major hit. The collapse of Silvergate, Silicon Valley Bank, and Signature Bank created quite a buzz across the world. While many called out the inconsistency of these banks and even feared the fate of their funds, a few others benefitted from the same. The crypto community was one among the latter.
Stablecoins like USD Coin [USDC] and Dai lost their peg to the U.S. dollar [USD] over the weekend. This dip further ticked off a loan repayment frenzy. According to a recent report, an astounding $2 billion in loan repayments occurred on March 11. This was, however, limited to DeFi firms Aave and Compound.
The USDC borrowers saved $84 million by repaying debts when the stablecoin was de-pegged, while those using DAI saved $20.8 million, according to blockchain analytics company Flipside Crypto.
During this period, MakerDAO’s stablecoin DAI de-pegged momentarily and fell to a low of $0.88. USDC, on the other hand, endured a similar fate as it plummeted to $0.87. It should be noted that both these assets have managed to regain their peg.
Once USDC and DAI began to move back near their peg, this fervor diminished. The following days did not see nearly as many loan repayments. On March 12 and 13, just around half of the estimated $500 million in loan repayments across Tether [USDT], USDC, DAI, and other stablecoins were made.
Did the failure of these banks put crypto under the spotlight again?
Apart from the fact that the above-mentioned debtors saved over $100 million, the overall crypto industry as a whole emerged stronger. For instance, Bitcoin [BTC] surged by 8% over the last 24 hours. The asset reached a high of $24,851.62 earlier today. Similarly, every other asset in the market was rising as well.
Cryptocurrencies have often acted as a hedge against the failure of financial institutions. The downfall of SVB paved the way for confidence in the crypto sector which prompted the ongoing rally.