Is USDC Another UST? DeFi Analyst Shares His Take
The exposure of USD Coin (USDC) reserves to failed banking institutions in the US is too low to cause problems for the second largest stablecoin, the researcher said. That’s why the worst may have already happened to Circle and its flagship product.
No, USD Coin (USDC) is not reset
In a recent thread, crypto analyst DeFi Ignace recommended not to overstate the similarities between the USDC stablecoin issues and the TerraUSD (UST) crash in May 2022.
1/ Are you panicking USDC now?
Yes, USDC has problems, but it does not reset like UST.
Circle has already clarified how much money they have stuck, and the situation may be better than what the market is now estimating.
— Ignatius | DeFi Research (@DefiIgnas) March 11, 2023
He stressed that of the entire basket of assets that supports the USD Coin (USDC) circulating supply, only $3.3 billion is stuck in Silicon Valley Bank (SVB), which is less than 9% of the dollar equivalent of its market capitalization. But even this money can be returned sooner or later through bank insurance procedures.
As a result, the exact damage could be less than $200 million, which is painful for the USDC, but not that dramatic. Its issuer has enough short-term US Treasuries to cover potential losses and rebalance USDC.
The panic in the cryptocurrency markets is intensified by the decision of Coinbase to stop redeeming USDC:USD; Binance (BNB) has also disabled USDC/USDT swaps. This means that when banks open on Monday, arbitrageurs will restore the 1:1 peg for USDC.
As Cryptooshala previously reported, the entire crypto segment is in trouble following the collapse of a number of crypto banks, including Silvergate, Silicon Valley Bank, and Signature.
DeFi analyst bets big: 40,000 Twitter accounts are at risk
Because Circle used to hold some of its USD Coin (USDC) reserves in SVB, the second-largest stablecoin lost its peg and dropped to $0.85 on some spot exchanges. By press time, it had recovered to $0.9.
That’s why it would be an exaggeration to compare USDC’s troubles to those that led to the collapse of the Terra (LUNA) ecosystem a year ago.
However, if the price of USDC finally drops to zero, DeFi Ignace has vowed to delete his Twitter account with nearly 40,000 followers.
Previously, he masterfully explained the real reasons behind the Fei (FEI) stablecoin shutdown, listed his revolutionary altcoin rating for the latest bull run, and suggested that the long-awaited release of Shibarium would benefit Dogecoin (DOGE).
Credit : u.today