The stablecoin world is once again facing uncertainty, and the world’s second largest stablecoin, USDC, is facing a potential black swan event, which may lead to the collapse of the entire stablecoin ecosystem. But an expert; he believes that the situation of USD Coin is very different from the collapse of TerraUSD (UST) asset in 2022.
According to our observation, the value of USDC is falling. This suggests that major shareholders are selling their assets. This is a worrying trend for USDC holders as it could lead to a bank run.
Despite the rumors, so far no on-chain evidence of a “bank run” has been found on USDC. However, investors are watching the situation closely as the potential impact on the entire cryptocurrency market is enormous.
Circle, the USDC issuer, destroyed $2.34 billion worth of USDC in the past 24 hours. While that may seem like a lot of money, it’s not when compared to historical data. Expert; He hinted that Circle’s move was to protect USDC from the black swan event of the US banking system.
The USDC situation is very different from the UST crash
In May 2022, the UST stablecoin collapsed, and the cryptocurrency market was in chaos. But experts; they believe that the current state of USDC is very different from the collapse of UST.
Unlike UST, USDC; it is a well-regulated stablecoin backed by traditional US financial institutions on a public blockchain.
If Circle fails, it could prevent U.S. financial institutions from conducting global financial operations on public blockchains.
A potential collapse of USDC could have far-reaching consequences, as it could prevent U.S. financial institutions from conducting global financial operations on public blockchains.
This would be a major setback for the cryptocurrency industry as it seeks to gain mainstream adoption.
How has the stablecoin ecosystem been affected?
The stablecoin ecosystem has already felt the effects of USDC losing its peg to $1. Major stablecoins such as DAI, USD Digital (USDD) and fractional algorithmic stablecoin Frax (FRAX) have all been hit by negative market sentiment due to USDC liquidations.
With a $6.78 billion supply collateralized by $8.52 billion worth of cryptocurrencies, DAI lost 7.4% of its value as USDC faltered. USDD and FRAX also suffered heavy losses.
Another major blow to USDC was the announcement by major U.S. cryptocurrency exchange Coinbase to suspend USD-USDC conversions during weekend bank closures.
Circle’s chief strategy officer, Dante Disparte, reported that Circle is currently protecting USDC from a black swan failure of the U.S. banking system.
Silicon Valley Bank closes, Circle holds some USDC cash reserves; it could have broader implications for business, banking, and entrepreneurs.
The USDC stablecoin is facing a potential black swan event that could lead to its own collapse with far-reaching implications for the entire cryptocurrency industry.
In any case, experts believe that the situation with USDC is very different from the UST crash in 2022, and the stablecoin ecosystem may be better equipped to deal with a potential crash. Investors and industry watchers will continue to monitor the market.
Information source: compiled from KOINBOX by 0x information.Copyright belongs to the author Banu Fırıncılar, without permission, may not be reproduced