Crypto exchanges are showing cautionary signs after Circle disclosed how much of its USDC stablecoin is backed by reserves held by Silicon Valley Bank.
Due to the closure of Silicon Valley Bank (SVB) on March 10, Circle, the company behind the USDC stablecoin, is under a lot of pressure. Recently, Circle revealed that SVB held $3.3 billion of its $40 billion in USDC reserves.
As a result, investors are moving for significant redemptions, which is causing the Circle stablecoin to drift away from its Dollar peg. The USDC peg fell to $0.9850 on Friday night, New York time.
The “uncharacteristically high volatility” in the USDC price, according to Noelle Acheson, the former head of market insights at Genesis Trading, is a direct reflection of investors’ worries. In an interview with Bloomberg, Noelle added:
“Tether’s USDT, on the other hand, is heading up as traders rotate positions. In yet another example of how weird markets are right now, it is astonishing to see USDT act more like the ‘safe’ stablecoin.”
Paolo Ardoino, the chief technical officer (CTO) of Tether, has likewise stated that the company has no exposure to SVB. As of right present, this makes USDT seem like a refuge for cryptocurrency investors.
Due to the USDC stablecoin’s extreme volatility at the moment, cryptocurrency exchange Coinbase has decided to halt USDC, USD conversions for the weekend. Binance recently posted the following on Twitter:
“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. Your assets remain safe & available for on-chain sends.”
Like Binance, several well-known cryptocurrency exchanges have started taking similar actions. Binance has halted the automatic conversions from USDC to BUSD due to the current market conditions.It said:
“Binance has temporarily suspended auto-conversion of USDC to BUSD due to current market conditions, specifically related to high inflows & the increasing burden to support the conversion. This is a normal risk-management procedural step to take while we monitor the situation”.
According to the most recent data, during the past 24 hours, investors have cashed out USDC worth close to $8 billion from centralized exchanges. It will be interesting to observe the effects as more significant exchanges halt conversions.
