Sudden Circle Depeg ‘Panic’ Could Be About To Crash The Price Of Bitcoin, Ethereum, BNB, XRP, Cardano, Dogecoin, Polygon And Solana
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The bitcoin price has sunk by 10% this week due to the failure of the crypto-friendly bank Silvergate, wiping away $100 billion from the combined crypto market as the price of top ten cryptocurrencies ethereum, BNB
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Now, the crisis at startup lender Silicon Valley Bank (SVB), where stablecoin issuer Circle held a part of its USDC cash reserves, is threatening to wipe out the second-largest stablecoin by market capitalization.
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The bitcoin price has already suffered a major crash this week, dragging down the price of ethereum, … [+]
“Silicon Valley Bank is one of six banking partners Circle uses for managing the ~25% portion of USDC reserves held in cash,” Circle posted to Twitter, exacerbating a near-10% drop from its U.S. dollar peg. “While we await clarity on how the FDIC receivership of SVB
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Circle has $3.3 billion of the $40 billion backing its stablecoin was deposited at SVB. SVB deposits of up to $250,000 are guaranteed by the Federal Deposit Insurance Corporation (FIDC), potentially leaving Circle and other depositors out of pocket.
“FIDC deposits are only insured up to $250,000 and when there is a bank run, depositors might lose out,” Markus Thielen, head of research and strategy at Matrixport, said in an emailed note.
In a further blow, major U.S. crypto exchange Coinbase
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“Circle is currently protecting USDC from a black swan failure in the U.S. banking system,” Circle chief strategy officer Dante Disparte posted to Twitter. “Silicon Valley Bank is a critical bank in the U.S. economy and its failure—without a Federal rescue plan—will have broader implications for business, banking and entrepreneurs.”
California-based SVB was taken over by regulators and shut down on Friday after panic spread among depositors who yanked around $40 billion from the bank and efforts to raise fresh capital failed.
The bank’s woes are thought to have begun when the U.S. Federal Reserve began hiking interest rates last year, wiping out the value of its mortgage bonds and US Treasuries. This week, Fed chair Jerome Powell told lawmakers he sees interest rates rising past market expectations this year.
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USDC, the second-largest stablecoin after tether, has lost its U.S. dollar peg, potentially sparking … [+]
Meanwhile, Circle’s banking problems, adding to the crypto crisis sparked by the collapse of Silvergate earlier in the week, have caused bitcoin transaction fees to spike as traders frantically try to secure their crypto.
“Bitcoin network transaction fees are very high and are indicating panic,” Thielen said, adding the largest stablecoin tether has managed to hold its dollar peg for now.
“From the three major stablecoins, we now have one standing and of course, that’s the big one. Tether’s USDT
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