Decoding the latest USDC update- Are USDT and DAI safer bets

  • Circle’s new statement revealed that USDC was 100% collateralized, with the majority of its holdings collateralized by US Treasury bills.
  • Many investors sold their USDC, however, some bought the floor.

There has been a lot of FUD surrounding Circle over the past few days after the company was hit by the bank run on Silicon Valley Bank (SVB).

On March 12th, Jeremy Allaire, CEO and co-founder of Circle, tweeted Circles opinion to this topic.

Circle du Soleil

According to Circle, its USDC stablecoin was 100% collateralised. Based on data provided by Circle, 77% of the USDC was backed by US Treasury bills, which totaled $32.4 billion. The remainder of his funds, totaling $9.7 billion, were held at various institutions, including SVB.

It found that of the remaining $9.7 billion, $5.4 billion was transferred to BNY Mellon to reduce banking risk.

At press time, SVB held a total of $3.3 billion in Circle funds.

The market reacts

Despite the Circle team’s best efforts to provide clarity on the matter, FUD continued to track the stablecoin.

Source: glass node

One indicator of the falling interest and rising FUD was the decreasing liquidity of USDC on Uniswap. At press time, USDC liquidity on the DEX hit a 2-year low of $85,190,702.41.

As skepticism towards USDC began to grow, interest in other alternative stablecoins such as USDT and DAI surged.

According to data from Santiment, the total market cap for DAI and USDT increased by 6.8% and 1.2%, respectively. However, USDC continued to lose ground as its market cap fell 8.1% over the same period.

Source: Santiment

One of the reasons for the sharp decline in USDC’s market cap was the behavior of various large funds and investors.

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This isn’t fun anymore

lookonchains Data pointed out that major investment firms such as Jump Trading, Wintermute Trading, and BlockTower Capital were trading large amounts of USDC for USD through Circle and Coinbase.

But it wasn’t just the funds that were exiting their positions, people like Justin Sun also got involved.

According to the data, Justin Sun exchanged $127 million USDC for $126.96 million DAI.

On the other hand, investors like Vitalik Buterin and firms like Taureon Capital showed great confidence in the stablecoin and bought USDC on the ground.

Given the scale of the SVB incident, numerous prominent investors and venture capitalists have expressed their views on the matter. In particular, angel investor Naval Ravikant commented in a tweet that this event could motivate companies to look for alternatives to deposit their funds than banks.


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