Panic ensues as USDC, 5th largest crypto coin, loses peg with dollar

Panic over the solvency of Circle, a major US-based crypto firm, grew overnight and Circle management had to reassure customers that their funds would be protected.

USDC, the second-largest stablecoin and fifth-largest cryptocurrency according to market cap, lost its peg to the dollar on Saturday morning as a result of some a good $2 billion in customer funds being withdrawn from Circle.

8% of Circle’s $USDC reserves were held at SVB bank. That is 3.3 billion. Pretty big hole! pic.twitter.com/fjKMkZYNJS

— Lark Davis (@TheCryptoLark) March 11, 2023

3,3 billion

The reason for the sudden uncertainty about Circle came after the Wall Street Journal announced that the company had some $3,3 billion in deposits with the now defunct SVB (Silicon Valley Bank).

Currently, only accounts with less than $250,000 in them are insured under the US system. Further news will follow on Monday.

$USDC peg falls beneath $0.90 amid the risk Circle has with holding reserves at Signature Bank and Silicon Valley Bank.

Probably not going to be such an heavy impact to #crypto, but stay safe! pic.twitter.com/l9rJZyYCOw

— Michaël van de Poppe (@CryptoMichNL) March 11, 2023

Roku, a well-known tech company, also admitted that it had some $500 million deposited at the bank and does not now know whether these funds will still be available on Monday.

Peg with dollar

As a result of the growing uncertainty about Circle, customers took out some $2 billion in customer funds from the company, so a real bank run for them. This made it uncertain whether Circle could still secure the peg of its stablecoin USDC to the US dollar.

We are temporarily pausing USDC:USD conversions over the weekend while banks are closed. During periods of heightened activity, conversions rely on USD transfers from the banks that clear during normal banking hours. When banks open on Monday, we plan to re-commence conversions.

— Coinbase (@coinbase) March 11, 2023

A lower price for USDC was shown on various crypto platforms on Saturday morning, as low as $0.89. The story is reminiscent of the bankruptcy of Terra and USDT last year.

Both Coinbase and Binance announced that exchanging funds against USDC is temporarily unavailable on their platform.