Here’s How Circle USDC’s Relationship With Silicon Valley Bank Caused The Current Mess

Since 2023, the entire banking sector has been under various worries. The banking world has seen it all with the closure of Silvergate and the recent problems with Silicon Valley Bank. However, this sequence of events has reverberations in the cryptocurrency space as well.

Silicon Valley Bank was recently shut down by California regulators. It all started when a series of questions surfaced about the banks raising capital. That inability slowly turned into an influence when the bank considered a sale. However, a series of events has now caused the bank to fail.

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Amid the chaos, Circle (USDC) is definitely getting attention, but not all for positive reasons. Reports that Circle holds an undisclosed amount of cash in SVB have been confirmed by the stablecoin issuer.

Circle (USDC) Falls Prey to Banking Chaos

After the news was disclosed, USDC was severely affected, as it was confirmed that USD 3.3 billion USDC reserves were held in SVB.

Circle also mentioned in the tweet:
“Like other customers and depositors who rely on SVB for banking services, Circle joins calls for this important bank to maintain continuity in the U.S. economy and will follow guidance provided by state and federal regulators.”

USDC was supposed to maintain its peg under market conditions, but went downhill. The stablecoin price decoupled, initially dropping to $0.95, then $0.90, and is currently at $0.9049, down 9.51% over the past 24 hours. The price dropped to $0.8774 before gaining momentum. CoinMarketCap data also shows that 24-hour trading volume has also surged by 379%.

Due to ongoing issues, exchanges such as Coinbase have announced the suspension of USDC to USD conversions. This was due to bank closures over the weekend and increased activity, the exchange said. The bank also made sure to resume the switchover on Monday.

Robinhood followed suit by suspending deposits for USDC transactions, as ongoing Circle events led to increased trading activity. CZ’s exchange, Binance, also decided to temporarily suspend the automatic conversion of USDC to BUSD, citing high inflows and market conditions. Binance said this is a normal risk management strategy.

Markets, reeling from the bloodbath following Silvergate’s collapse, are now slightly higher. However, analysts said that this is only temporary, as the USDC incident has sparked the cryptocurrency community and the market.

Source of information: Compiled from WATCHER by 0x Information.Copyright belongs to the author, Vignesh Karunanidhi, and may not be reproduced without permission

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