In response to the extraordinary USD Coin (USDC) stablecoin de-peg event caused by the collapse of its counterpart Silicon Valley Bank (SVB), crypto whales have reported severe losses and appear to have embarked on a series of leaks. capital to protect assets. Du Jun, the co-founder of cryptocurrency exchange Huobi Global, job:
“(I) dodged, LUNA, dodged 3AC, even dodged FTX (and their meltdown), but I couldn’t dodge Silvergate, nor SVB, and USDC. Asked a few crypto veterans; the losses continued amounted to over a billion dollars in stocks and deposits, myself included. I am very upset and it is time to reduce my budget.“
On the same day, blockchain personality and Tron founder Justin Sun would have withdrew 82 million USDC from the decentralized finance (DeFi) protocol, Aave v2, over a series of transactions and exchanged Dai (DAI). At press time, 82 million USDC is worth $75.26 million.
Speaking of DAI, MakerDAO, the issuer of the stablecoin, filed an emergency memorandum on March 11 which, among many articles, called for restrictions on minting DAI using USDC to prevent panic selling. . MakerDAO is one of the largest holders of stablecoins, with over 3.1 billion USDC ($2.85 billion) in reserves backing DAI, which has also opted out as a result. Subsequently, crypto projects incorporating DAI into their tokenomics have also suffered losses due to a chain reaction.
Curve Finance, a popular DeFi protocol for trading stablecoins, reported a record daily trading volume of $5.67 billion due to the events. In context, the protocol only has a total locked value of $3.77 billion. A few other platforms simply couldn’t handle the sheer volume of USDC-related trade requests. In one incident, a user only received 0.05 Tether (USDT) after paying over 2.08 million USDC in an exchange that resulted in a permanent loss. In an update, KyberSwap, the decentralized exchange responsible for facilitating the exchange, said he was “helping to recover funds” and is in contact with the user regarding the problem.
According to Loki Zeng, a prominent DeFi analyst at New Huo Technology, Circle’s reserves are split between $32.4 billion in treasury instruments, $3.3 billion in deposits at SVB, and $7.8 billion in deposits in other financial institutions. Zeng writing:
“For USDC to fail, it must meet three conditions; there is an abundance of deposits at SVB and three other risky banks, the recovery rate of these deposits remains low and the USDC cannot mitigate these losses.
Zeng added that his personal opinion is that “there is a low probability of a problem, and even if there is a problem, it won’t be as bad as FTX.” Nonetheless, the DeFi analyst added that his estimate of USDC’s net worth is “$0.885 in extreme and $0.985 in normal.” At press time, the USDC price has fallen 8.30% in the past 24 hours to $0.9163.
Alex Svanevik, CEO of blockchain analytics firm Nansen, also commented that Circle and the USDC “can make it happen”. However, Svanevik also warned that Circle demands “top-notch execution over the next few days”, such as “flawless buyouts”, and no calls for “bailout publicity”. In another tweet, Svanevik also revealed that a user had moved 25 million USDC from his PulseX sacrifice wallet and exchanged it for DAI.