Circle’s USD Coin (USDC) redemptions have reached $2.5 billion in the last 24 hours, with $7 billion in stock market inflows since the Silicon Valley Bank collapse. What do these developments mean for altcoin?
Altcoin project burned 2.5 billion USDC!
USD Coin (USDC) redemptions from stablecoin issuer Circle exceeded $2.5 billion in the last 24 hours. Investors are turning away from the altcoin project as Silicon Valley Bank (SVB), one of six banking partners that manages 25% of the reserves, was shut down by a US regulator and transferred to the US FDIC to protect depositors.
CryptoQuant CEO Ki Young Ju reveals in a series of tweets on March 11 that Circle has burned around 2.5 billion USDC in the last 24 hours. The total burn after the shutdown of the SVB may have risen to over $3 billion. Young Ju claims it’s not a significant coin compared to historical data. In this context, “A drop in value to zero is possible if major shareholders sell out. For now, no on-chain evidence of a USDC bank run has been found,” he explained.
CryptoQuant data reveals that Circle’s USD redemptions exceeded $4.5 billion on Feb.
Also, Ki Young Ju believes that the USDC situation is completely different from the TerraUSD (UST) collapse. The Luna Foundation Guard has sent billions of BTC to crypto exchanges to mine Terra (LUNA) to sustain the peg, risking its crash by market makers.
USDC inflows to exchanges reach $7 billion
USDC is the only regulated stablecoin, with cash reserves backed by traditional financial institutions on public blockchains. According to experts, Circle’s failure will thwart US financial institutions’ plans to launch global financial businesses on public blockchains.
On-chain data also reveals that the stock market entry exceeded $7 billion in two days. Meanwhile, foreign exchange outflow reached approximately 6 billion dollars in two days. Meanwhile, cryptocoin.comAs you follow, USDC has yet to catch the $1 peg and continues to trade at $0.974 at press time.
From VC investor to USDC holders: Don’t panic!
Veteran investor Dovey Wan thinks the effects of Silicon Valley Bank’s collapse on Circle are exaggerated, as millions of USDC holders launch a ‘bank rush’ and replace their stablecoins with alternatives (largely its main competitor, USDT). Today, on March 11, 2023, Dovey Wan stated in a tweet that there is no need to panic swap USD Coin (USDC) with alternative stablecoins or buy from DeFi protocols. He asked the cashier operators and ordinary owners not to panic.
According to his estimates, the losses Circle can bear are not fatal for the fintech heavyweight. Primarily, they would be covered by short-term US treasury papers, which make up the lion’s share of the USDC support basket. On Monday, March 13, 2023, when banks open, conversions between USD Coin (USDC) and nominal USD will continue and the 1:1 anchor will be effective again.
How much is actually lost?
It’s still unclear how much money has gone forever. Dovey Wan thinks it’s around $0.8-1 billion, while analyst DeFi Ignas is confident that around $200 million has been lost. Wan thinks US regulators are responsible for the collapse of major crypto-friendly banks and its potential impact on the global financial ecosystem. She states the following in this regard:
The effect of allowing the SVB to free fall is a big slap in the face to the Fed/Treasury. This will significantly destroy the financial backbone of technology in the US.
But if the FDIC takes action immediately, the consequences of this drama may not be as devastating for tech startups and fintech institutions as they seem right now.
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