Early on Saturday, the stablecoin USD Coin (USDC) lost its 1:1 dollar peg, plummeting to $0.88** after Circle, its issuer, revealed that $3.3 billion of its $40 billion reserves were held at the now-collapsed Silicon Valley Bank (SVB). This triggered a 10% price drop** as investors rushed to withdraw funds.
By Sunday night, USDC began recovering, trading at $0.991021 (CoinGecko). However, the de-pegging ripple effect impacted other stablecoins:
- DAI fell 7.4% ($0.897) due to 51% USDC backing.
- FRAX dipped to $0.885.
- Tether (USDT) remained stable, even peaking at $1.08.
Will USDC De-Peg Again Soon?
Investors fear a repeat of the de-pegging or a Terra-like UST collapse. Key reassurances:
- FDIC Intervention: The U.S. government guaranteed SVB depositors’ funds, mitigating systemic risks.
- Circle’s Reserves: USDC is 77% backed by U.S. Treasury Bills ($32.4B) and 23% by cash ($9.7B) across multiple banks—SVB held only ~8% of reserves.
- Corporate Backstop: Circle pledged to cover any shortfall using corporate funds or external capital if FDIC repayments are delayed.
"Silicon Valley Bank is one of six banking partners Circle uses for managing the ~25% portion of USDC reserves held in cash."
— Circle (@circle)
FAQs
Q: Is USDC still safe to use?
A: Yes, with robust collateralization (77% Treasuries) and FDIC protection for SVB deposits, full recovery is likely.
Q: How does this compare to Terra’s UST collapse?
A: Unlike algorithmic UST, USDC is asset-backed. The SVB exposure was limited, and Circle has liquidity safeguards.
Q: Should I convert USDC to USDT?
A: While USDT maintained its peg, diversification is prudent. Monitor updates from Circle and regulators.
👉 Learn how stablecoins maintain pegs
Key Takeaways:
- USDC’s de-pegging was temporary, driven by SVB’s collapse.
- Regulatory action and Circle’s transparency bolster confidence.
- Diversifying stablecoin holdings reduces risk.