Robert Steinadler, 8 days ago

Circle dodged a bullet: USDC regained its peg

When it became clear that Circle had $3.3 billion stuck at the Silicon Valley Bank the market went wild. USDC lost its peg and was trading way below 1 US-Dollar. Bear market PTSD set in and the broader crypto media was already discussing if USDC would fail. Fortunately, things turned around shortly after the initial turmoil and Circle was made whole again. This has been a big relief for the market but needs some explanation.

How did the SVB drama play out for Circle and is USDC out of the woods?

FDIC made depositors' whole

The Silicon Valley Bank was one of the top 20 banks in the US. Its downfall caused a lot of uncertainty among depositors of other banks. In response to this situation and to prevent a full-blown bank run, the FDIC declared that SVB had systemic relevance to the US banking system.

This was a big relief for depositors since it meant that the Fed, the FDIC, and the Treasury Department would make all depositors whole. Only shareholders of SVB were left behind empty-handed. What we are looking at is not the same as the situation in 2008. It is only half a bailout because only depositors were rescued.

Lucky for Circle because they had $3.3 billion stuck at SVB. Under normal circumstances, only $250,000 would have been insured by the FDIC. In conclusion, the US government saved the day and a stablecoin from losing its peg. At that time, Circle only had about $37 billion to cover 40 billion USDC and most of that money was invested in treasury bills.

Circle says that USDC redemption is back to normal levels

On Wednesday Circle published a blog post to address the situation. According to the company, it had redeemed USDC worth $3.8 billion by Monday and minted USDC worth $800 million at that point. Circle engaged in new banking partnerships on Tuesday. US and international wire transfers are working again.

USDC has also regained its peg and is trading close to 1 US-Dollar again. Investors are still monitoring the situation closely as past experiences with UST have left them deeply traumatized. Ironically, the government saved a crypto asset along with a bank.

With this crisis being resolved Circle along with the rest of the crypto market dodged a bullet. Now that the company is operating at normal levels, trust among investors can be regained.

Featured image: Grey82 /

Featured articles
Four trading strategies for crypto
Bitcoin and Ethereum: what are the differences?
What determines the Bitcoin price?
Related articles
Stablecoin USDC loses 1 dollar value after US bank failure: temporarily?

Mar 13, 2023

Stablecoin USDC lost its peg of 1 dollar. In the early hours of past Saturday, it even temporarily fell as low as $0.89. The reason is that Silicon Valley Bank (SVB), which held dollars that backed USDC, went under. Only after the American Government made the assurance that SVB depositors will be made whole, USDC recovered to $0.99.

Trade anytime, anywhere

Boost your trading impact and reaction time in over 80+ cryptocurrencies via instant access to your portfolio with the LiteBit app.

  • 2525 Ventures B.V.
  • 3014 DA Rotterdam
  • The Netherlands
More info
  • About LiteBit
  • Careers
  • Support
  • Sell
  • News
  • Education
  • Affiliates
Subscribe for updates

Sign up to stay informed via our email updates

Explore popular coins
© 2023 LiteBit - All rights reserved