The cryptocurrency market displayed signs of recovery amid concerns of liquidity issues stemming from the failure of two US banks — Silvergate and Silicon Valley Bank.
But the depegging of the USD Coin (USDC) is reminiscent of the Terra stablecoin terraUSD (UST) in 2022. The USDC stablecoin had at one point lost 12 cents of value owing to its exposure to the Silicon Valley Bank. Circle, the USDC operator, said it has exposure to around $3.3 billion of stablecoin reserves in the bank.
While the stablecoin depegging was caused by panic selling, some of the crypto funds appear to be confident of a recovery eventually. Some of the crypto funds, including a wallet purported to be of Vitalik Buterin, are accumulating USDC at its current price, which is around nine cents down from its peg.
Firms like Jump Trading, Wintermute Trading, Genesis Trading, and BlockTower Capital are said to have bought USDC, just in time before the weekend bank holiday, as per on-chain data.
Meanwhile, the Bitcoin price is showing encouraging signs with recovery by around 2.50%, after a few days of bearish momentum that began with the crisis around Silvergate Capital. On the other side, the selloff in the stablecoin triggered a demand for another top stablecoin, Tether (USDT), which saw a rise in daily trading volume by around 17%.
On Friday, California regulators seized the Silicon Valley Bank and assigned the FDIC with the responsibility to handle insured deposits, which will be accessible on Monday, 11 March 2023. The latest stablecoin depegging comes at a time when US regulatory agencies like the U.S. Securities and Exchange Commission (SEC) initiated enforcement actions on crypto businesses.
