USDC Stablecoin Loses Access to $3.3 out of $40 Billion in Reserves Due to Collapse of Silicon Valley Bank

One of the biggest banks in tech collapsed in 48 hours. What happened next shocked the crypto world.

USDC, the stablecoin that holds $40 billion US dollars in reserve in a 1:1 ratio with each cryptocurrency unit… decoupled.

1 USDC was no longer worth $1 USD.

It even hit about $0.88 at its worst drop so far.

How? Why?

Because it turns out that USDC was holding $3.3 BILLION (8.25%) of its total reserves in Silicon Valley Bank — which after a run on that very same bank Thursday afternoon and Friday morning by worried investors & startups collapsed and was immediately taken over by the FDIC.

Circle is a company that issues USDC, a cryptocurrency stablecoin.

A stablecoin, in simple terms, is a cryptocurrency token that can be used on a given blockchain (such as Ethereum), and the issuer has a financial strategy in place that “pegs” the value of the token to a certain value.

In the case of USD coin (USDC) they pegged their token at one U.S. dollar by holding around $40B in reserves against the slightly more than 40,000,000,000 tokens they have in circulating supply.

The fact that the fully diluted market cap of $38,792,674,235 doesn’t match the circulating supply of 40,864,504,619 USDC tokens is a very bad thing and means that USDC is no longer acting as a stablecoin.

At around 6:00PM ET the initial market vibrations began as trading volume began steadily rising and USDC began decoupling from it’s $1 peg.

By the time Circle officially announced their partial exposure at 10:11PM on Friday, March 10th 2023 of $3.3 billion — well, that’s when things went completely off the rails.

By 11:00PM ET the trading price had dropped to $0.95 and by 3:00AM ET Saturday morning was touching $0.88.