Many crypto investors abandoned centralized exchanges for decentralized exchanges and bought the USDC stablecoin shortly after the collapse of the Silicon Valley Bank.
A crypto-friendly Silicon Valley Bank (SVB) collapsed on March 10, causing panic in the cryptocurrency market. SVB held 8% of the total stablecoin issuer circle’s USD Coin (USDC) reserves.
The collapse significantly affected the issued USDC price of Sirlus, with the stablecoin de-pegging from its $1 peg and falling to an all-time low on 11 March. However, prices rebounded and USDC regained its dollar peg.
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Cryptocurrency investors responded to the SVB failure by moving their assets to decentralized exchanges (DEXs) and converting them into USDC.
According to data from the Chainalysis blog published on March 16, there was a massive outflow from CEX to DEX immediately after the collapse of SVB. Hourly outflows increased to over $300 million.
Chainalysis says the phenomenon is not unique, as investors often abandon CEX for DEX whenever there is panic in the market. The blog states that this phenomenon occurs because people fear losing access to their funds if a crypto exchange collapses.
A similar trend was observed shortly after the collapse of the cryptocurrency exchange FTX in 2022.
However, this spike in activity on DEXs is often short-lived, as shown by data from Token Terminal.
According to Chainalysis, USDC is the most bought digital asset on major DEXs such as Uniswap and Curve3Pool.
The source pointed out that many users have faith in stablecoins. Therefore, they rushed to buy USDC when prices were relatively cheap, believing it would soon regain its dollar peg, which it did within two days.
Gill K. By – Crypto analyst, Bitdegree
