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Breaking News: Coinbase Confirms DOJ Investigation Following Major Security Incident

USDC Is In Trouble, But It Won’t Go To Zero Like UST Did – Here’s Why

Dalmas Ngetich
Dalmas Ngetich
1 year ago
2 mins read
Circle USDC

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USDC, the stablecoin tracing the USD, is under immense pressure as users rush to convert to other assets, including BUSD by Paxos and USDT by Tether Holdings.

USDC Has De-pegged

As USDC’s market cap rapidly shrinks, primarily because of mass exits, there has been a de-peg. The stablecoin is trading at $0.90 to the USD at the time of writing on March 11. 

USDC Price On March 11| Source: Gemini On TradingView
USDC Price On March 11| Source: Gemini On TradingView

However, amidst this fear, USDC won’t likely crash to zero like UST, the algorithmic stablecoin by Terra, did. 

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The collapse of UST was attributed to its structure and backing by other digital assets, including Bitcoin and LUNA. 

Since it depended on algorithms to track the value of the USD and always ensure parity, any pressure on any underlying coins, Bitcoin or LUNA, led to intense selling pressure, causing a de-peg. 

The UST de-peg triggered a ripple effect that eventually saw the crypto market drop below $30k, causing massive liquidation and pain for affected holders.

What’s on the table currently is USDC by Circle. Although USDC is at $0.90, further weighing negatively on cryptocurrency prices, it is improbable that the USDC will drop to $0. 

As an illustration, the token has a circulating supply of $40.9 billion as of March 11. Each USDC token, it should be noted, is backed 1:1 with cash, and redemption means every backing cash or cash equivalent from Circle must be sold and disbursed to the client.

Expecting Normalcy To Resume On Monday?

Circle has said it has enough reserves despite $3.3 billion out of the total $40 billion held at Silicon Valley Bank (SVB). 

1/ Following the confirmation at the end of today that the wires initiated on Thursday to remove balances were not yet processed, $3.3 billion of the ~$40 billion of USDC reserves remain at SVB.

— Circle (@circle) March 11, 2023

Because SVB was FDIC insured, there will be a 94% payout, meaning even if there is a loss of approximately $198 million, it won’t be a big dent for Circle to warrant fears and conversions to other stablecoins. The loss will likely be covered by interest payments from treasuries, where most of Circle’s assets are held in.

Several other factors worsen the current stablecoin’s preview, even contributing to the de-peg. The decision by Coinbase to pause USDC to fiat conversions over the weekend until Monday is stoking fear.

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We are temporarily pausing USDC: USD conversions over the weekend while banks are closed. During periods of heightened activity, conversions rely on USD transfers from the banks that clear during normal banking hours. When banks open on Monday, we plan to re-commence conversions.

From next week Monday, the peg will likely be restored as arbitrageurs flow back in.

Feature Image From Canva, Chart From TradingView
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Dalmas Ngetich
Dalmas Ngetich

Dalmas Ngetich

Dalmas, a seasoned crypto reporter, brings a unique perspective to the industry. His specialization in NFTs, blockchain, DeFi, and blockchain news for NewsBTC, combined with a background in mechanical engineering and over a decade of experience in journalism, has allowed him to craft over 10,000 news and feature articles over the past eight years. His diverse range of topics, including technology, Forex, and finance, reflects his comprehensive understanding of the crypto landscape.

Read more

His technical expertise and analytical skills have been recognized and featured by leading news outlets such as Investing.com, CoinTelegraph, Entrepreneur, Forbes, and other authority sites. Notably, he broke key news, including the Ripple and MoneyGram partnership, cementing his position as a thought leader in crypto.
The news exploded. Over 100,000 people devoured this meticulously crafted report, from seasoned investors to curious newcomers. His analysis wasn't just dry facts and figures; it crackled with insight, dissecting the implications of the partnership and its potential impact on the future of finance.

His deep understanding of the financial markets, technological advancements, and blockchain developments has made him a respected voice in the industry.

Dalmas is also the founder of BTC-Pulse, a crypto news site, further demonstrating his commitment to the field. He firmly believes that DeFi and NFTs are here to stay and will continue to drive financial inclusion.

Coming from Nairobi, Kenya, it is easy to see the source of his inspiration: Across Africa, millions lack access to traditional banks. Remote villages, limited documentation, and high minimum balances create insurmountable barriers.

DeFi, not just Maker or Aave, for example, but think of Bitcoin and USDT, cuts out the middleman. Forget banks with their limitations.
Even so, DeFi isn't a magic solution. The continent still struggles with reliable internet access, and educational campaigns highlighting the benefits of this wonderful solution are insufficient. Moreover, even for those interested, understanding DeFi can look like learning a new language.

Dalmas is here to help make the tech easy to understand and digestible, even for beginners.
The story of DeFi in Africa is still being written. Challenges abound, but the promise of a more inclusive financial future is a powerful motivator. With innovation and collaboration, Dalmas firmly believes that DeFi could become the key to unlocking Africa's full economic potential.
This possibility and its immense value motivate Dalmas to continue breaking key DeFi innovations and more across the globe. His engineering background further enhances his ability to deliver well-thought-out pieces that blend technical insight with clear, impactful reporting.

Beyond his professional achievements, Dalmas is deeply passionate about technology and politics. Policies drive adoption, and being at the forefront and keeping up with how they evolve is crucial for the sphere to mature.

When Dalmas is not closely monitoring the latest crypto events, he can be found in nature, exploring the picturesque countryside, and traveling with his family and friends. His love for adventure and discovery perfectly complements his investigative and reporting skills.
You can connect with Dalmas on X: @Dalmas_Ngetich, or contact him on Telegram @Dalmas_Ngetich.

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Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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Reason to trust

Strict editorial policy that focuses on accuracy, relevance, and impartiality
Created by industry experts and meticulously reviewed
The highest standards in reporting and publishing
How Our News is Made

Strict editorial policy that focuses on accuracy, relevance, and impartiality

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