The USDC De-Peg Explained

Today, we're going to be talking
about the U.S. Situation. So what happened? Well, in the early Saturday
morning hours on March 11th, The Silicon Valley Bank
or SVB failure caused the U.S. See to dipping from $1. The price dipped to almost $0.88
before recovering. At the time of this video,
and the reason for the dip is that circle The company issuing USDC has $3.3
billion in reserves a tied up and SVB. And this is money
backing the value of U.S. C and if it was to be lost
as part of SVB failure, It would mean a financial hit for circle. So what happened to Silicon Valley Bank? Well, last Friday, Silicon
Valley Bank, SVB, was shut down By the California Department
of Financial Protection and Innovation As the bank collapsed due to a bank run
amid concerns over its financial health. And this was the second largest bank
failure in the U.S. Since Washington Mutual in 2008. The state chartered commercial bank
has a lot of crypto entities as clients, Making its failure particularly relevant
for the crypto industry. The Federal Deposit Insurance Corporation,
or FDIC, has taken Receivership of the bank,
according to an FDIC press release. All insured depositors will have access
to their insured deposits, And the past weekend saw the second
most valuable stablecoin at USDC de-peg As a result of bank's failure, including
in, Silvergate and Silicon Valley Bank. And it didn't take much time For the panic to spread as Signature
Bank was also closed by U.S. Financial regulators on Sunday
and there is one major link Connecting these banks,
which is exposure to the crypto industry. So let's go over a brief history
of signature bank. Signature Bank is a full service
New York commercial bank and it was known For its convenient service
and deep connection with the real estate And legal sectors, with 40 private
client offices across the five U.S. States. The banking institution had nine
national business lines, including venture

Banking, mortgage
servicing and commercial real estate. By the end of 2022, The bank had accumulated
a total of a $110.4 billion in assets And collected deposits
amounting to $88.6 billion in the late 2010, It grew both geographically
and in terms of services it provided, Most notably with its decision
to embrace cryptocurrency businesses, Which accounted for 30% of its deposits
as early as 2021. Hailed
as one of the top crypto friendly banks. Signature Bank had established a 24/7
network for its crypto clients, Which led to significant growth
in its crypto deposit portfolio. And according to CNBC, the total
number of deposits went up as high As $16.5 billion from crypto
investors on March 12th of 2023, The New York State Department
of Financial Services shut down the bank Following two days of turmoil
after Silicon Valley Bank imploded, Making it one of the most significant
financial collapses in U.S. History. So why was Signature Bank seized? Well, to put it shortly, signature bank
faced the repercussions of Silicon Valley Bank's collapse and subsequent seizure
by regulators on Friday last week. And as news of Silicon Valley
Bank's woes spread like Wildfire contagion hit signature banks
customers. And according to The New York Times,
most signature customers had more than The 250,000 limit insured by the Federal
Deposit Insurance Corporation, or FDIC. And consequently felt vulnerable About potential losses
in case of a similar incident And a flurry of withdrawals, over
$10 billion began to happen. And despite this, outflows
actually slowed down by Sunday morning. Over in a shocking turn of events,
a statement was released by the Department Of the Treasury, which announced
the resolution of Signature Bank in a move To protect the US economy by strengthening
public confidence in our banking system. So let's talk about the impact on crypto Wallet, both signature
banking and Silvergate Bank had launch Signatures, Signet Network and Silvergate
Exchange Network SEN to improve The transactions of digital assets
between crypto platforms and their banks. Coinbase, Circle and other crypto
companies Incorporated Signet and SEN

To assist institutional customers
in transferring, Managing and settling accounts
over after the collapse of these banks In quick succession, analysts have cited
it as a huge step back for cryptocurrency Infrastructure, likely resulting
in reduced liquidity within the U.S. And some in the crypto space
believe the seizure was part of a wider Move by regulators
to shut down crypto in the U.S.. So how bad is this for USDC? Well, it's not great by any means,
but there is a good reason To believe
that it's nowhere near as bad as UST. Meaning USDC is not going to go to zero
as Ignas explains, Circle Has a fraction of its reserves
stuck in SVB but that is only about 8%. And it doesn't mean
that the money is gone. Most of its reserves are actually short
term Treasury bills, and the fraction Held at SVB will likely be recoverable
to a large degree. But currently it looks like Circle
is actually just taking a slight Financial hit that is easily recoverable From the profits
it makes by operating the Stablecoin. But then why did USDC de-peg so much? Well it's likely
because the market has PTSD From the USD collapse
and because Coinbase and Binance Stopped the USDC conversions
and contributed to an illiquid market. Also the Curve three pool got drained
very quickly and on Monday insured Depositors got paid by Silicon Valley Bank
and the fallout for now Is still to be determined. But on the bright side,
USDC has fully repaid following its circle CEO Jeremy Allaire statement
that 100% of the deposits From SVB are secure
and also will be available to clients. And as the story develops, CoinMarketCap
Alexandria will provide more updates. So make sure you check out the description
below for the latest information.