The temporary decoupling of USD Coin (USDC) from the US dollar was not bad news for everyone. In fact, last weekend a group of people who still had outstanding debt in USDC benefited from the misery. Following the collapse of Silicon Valley Bank on March 10, USDC fell to a low of $0.87 apiece.
USDC decoupling feast for debtors
The decoupling of USDC was a celebration for debtors, because they suddenly needed a lot less money to pay back their debts. So they immediately benefited from the decoupling by buying cheap USDC to pay off their debt.
The decoupling to the US dollar triggered more than $2 billion in repayments on March 11 through decentralized lending protocols like Aave and Compound. More than half of those repayments were in USDC, indicating that a large group of people benefited from the situation.
It will have been a less pleasant development for the creditors, because they saw their assets virtually evaporate. Meanwhile, the peg with the US dollar has been restored for USDC and calm seems to have returned. However, it remains to be seen whether this will remain the case in the coming days.
USDC volume is slowly declining
The huge explosion in the number of redemptions has meanwhile returned to normal following the re-linking of USDC and also DAI. In the end, DAI also fell, because that stablecoin is largely backed by USDC. But as you can see in the graph below from analytics firm Kaiko, the number of refunds on Aave and Compound’s DeFi protocols has dropped significantly again.
Aave and Compound borrowers took advantage of USDC’s depeg to repay their loans; about $1bn USDC was repaid on Aave on March 11 alone pic.twitter.com/sfVznRmjL0
— Kaiko (@KaikoData) March 13, 2023
Blockchain analysis company Flipside Crypto calculated that debtors who still had to repay USDC saved 84.1 million. In the case of DAI, the savings amounted to as much as $20.8 million.
At the time of writing, USDC’s peg to the US dollar has almost completely recovered. The coin is now selling for $0.9994. Tether seems to have benefited from the misery, because that stablecoin is currently at a price of $ 1.01.