Crypto investors withdraw $3 billion from stablecoin USDC in just 72 hours following the collapse of SVB
In days leading up to the collapse of Silicon Valley Bank (SVB), venture capital firms and tech startups scrambled to withdraw their deposits. But the fallout was widespread. Stablecoin USDC also lost its peg, falling as low as $0.88 on the same day of the bank’s collapse but later returned to $1 on Monday, according to data from CoinGecko data.
That’s not all. Circle, the company behind the USDC, also said in a blog post that crypto investors pulled around $3 billion overall from the stablecoin USDC in just three days as investors rushed to redeem their holdings in the wake of the bank’s collapse.
From Monday to Wednesday, Circle said it processed $3.8 billion of USDC redemptions (investors swapping their tokens back into U.S. dollars) and created $0.8 billion more of the token. This means that investors pulled around $3 billion overall in the three days. The withdrawal was even bigger in the past week. According to CoinGecko data, investors have pulled a net $6 billion from USDC stablecoin in the last seven days.
“Since Monday morning, Circle has redeemed $3.8 billion USDC and minted $0.8 billion USDC. The events of the past week have impacted the liquidity operations for USDC. Circle has worked tirelessly to re-initiate services with alternative banking partners, particularly payment and USDC redemption services. We would like to thank our customers for their patience during these unprecedented times,” Circle wrote.
With the collapse of Silicon Valley Bank, Circle said it would allow automatic USDC redemption through a new banking relationship, with Cross River Bank.
“On Tuesday, March 14, we went live with a new transaction banking partner for domestic U.S. wires in and out. Today, we went live with that same partner for international wires to and from 19 countries. We also went live today with an existing transaction banking partner for international wires. We expect to bring more capabilities back on line tomorrow,” Circle said in a blog post.
Stablecoins, especially USDC, have increased in reach and popularity over the years. They are virtual currencies that are always supposed to have the same real-dollar value. They’re theoretically pegged at the same value as a dollar but can be traded without following regulations on dollars. USDC is the second-biggest stablecoin after USDT with a market cap of $37.6 billion.
Crypto-day traders typically use Stablecoins as safe haven by shifting their unstable tokens to safe real currencies (like the dollar) because wild market fluctuations make it unsafe to hold. Unlike regular cryptocurrencies like Bitcoin and Ether, stablecoins are cryptocurrencies without volatility.