Circle previously announced that it had $3.3 billion in capital tied up with Silicon Valley Bank. Following the bank’s woes, Circle quickly attempted to withdraw all of its assets (approximately $40 billion). Of that, $3.3 billion lingered, causing investors to temporarily lose confidence in Circle’s USD Coin (USDC) stablecoin. It fell back to a price of $ 0.87 per unit, but has now fully recovered.
Problems over?
Now Circle CEO and co-founder Jeremy Allaire announced that the stablecoin issuer has been able to regain access to its $3.3 billion in capital since March 13, which is with the failed bank. Speaking to Bloomberg Markets on March 14, Allaire says that “everything, or at least almost everything” has been taken away from Silicon Valley Bank.
In that respect, we can say that USDC is at least safe again at the moment and that there is no reason for fear in that regard now. Despite that, the market cap of the stablecoin has dropped significantly. From the woes that started on March 11, USDC has lost about 10 percent in market cap.
Tether, on the other hand, benefited from the problems at USDC, which in itself is a logical development. Many investors had to flee to an alternative and then Tether naturally stands out. Tether’s market cap climbed about 1 percent during this period.
Eight percent of reserves
The $3.3 billion tied up with Silicon Valley Bank represented about 8 percent of Circle’s reserves for USDC. If you look at it that way, it is suddenly a fairly large amount. Still, it probably never really became a problem for the company. Coinbase is also an important pivot in this stablecoin and they would probably have stepped forward if the problems were really big.
The market was completely panicked for a short period of time, but if you ask TedTalksMacro, this was unjustified. According to him, nothing was ever wrong and the market reacted a bit irrationally. On the other hand, it also suits the crypto market to respond in this way. If there is even the slightest reason for panic, then generally a gigantic panic erupts.