At the time of writing, the USD Coin (USDC) stablecoin of the American Circle fell to the price of $ 0.89. The reason for that drop is that there is $3.3 billion of Circle at Silicon Valley Bank that they can no longer withdraw.
On March 9, Circle attempted to withdraw its entire $40 billion capital from the bank, but ultimately only succeeded in withdrawing $36.7 billion. The remaining $3.3 billion is tied up and most likely will not come back.
Crucial to the US economy
It is striking that Dante Disparte, the head of Circle’s strategy department, mentions that Silicon Valley Bank is crucial to the US economy. The collapse of the bank, without a federal rescue plan, would have far-reaching consequences for companies, banks and entrepreneurs in the United States, he said.
“As with Silvergate, our team worked at top speed to minimize exposure to the banks. This included a request to get our money back from Silicon Valley Bank. Now $3.3 billion remains,” said Disparte.
To illustrate the potential collapse of a bank like Silicon Valley Bank, the response from Coinbase and Jump Trading is important. First, Circle panics trying to take money away from Silicon Valley Bank, and when that doesn’t quite work out, Circle customers panic.
Coinbase and Jump Trading turned in $850 and $138 million in USDC to Circle, respectively. This way you can see how the problems at a bank can quickly be felt throughout the entire financial system.
Is a banking crisis coming?
It seems that the Federal Reserve’s interest rate hikes are now being felt in places where the US central bank would rather not have them. Twitter is already talking about a potential banking crisis. The shares of many Western banks are currently falling hard, although Europe has been reasonably spared so far.
If there is a banking crisis, the Federal Reserve may well have to intervene. That would mean a complete reversal of his policy. If more banks fail or a situation arises that is potentially threatening to the entire US economy, there is a good chance that interest rates will suddenly fall very quickly or support packages will be introduced.
In that respect, we are entering a very interesting period for Bitcoin and crypto in general. There is a chance that Bitcoin will experience its first global recession and it will be exciting to see what that will mean for the price.