USDC and DAI deviated from the dollar due to the storage of reserves in the troubled Silicon Valley Bank

The operator of one of the largest stablecoins, Circle, has announced that $3,3 billion of reserves are being held in a Silicon Valley bank. Against this background, the USDC and DAI rates got rid of the dollar.

The collapse of the Silicon Valley bank was the largest since the 2008 crisis in the United States. Federal Insurance Corporation the US federal depository (FDIC) was forced to take action and take control of the bank's operations. Silicon Valley has served many tech companies, including Circle, the company behind the USDC stablecoin.

Considering that USDC capitalization exceeds $41 billion, the temporary unavailability of $3,3 billion should not be a significant problem, especially since deposits in Silicon Valley are insured by the FDIC, although there are rumors of a possible loss of 40% of these funds. The announcement that Circle had significant amounts of money in the bank caused some panic. The stablecoin exchange rate got rid of the dollar exchange rate and fell by 2% on some sites. USDC is currently trading at $0,93.

The DAI stablecoin also had problems - the security of this token is partially contained in USDC. Thus, the DAI exchange rate also freed the dollar. The token is currently trading at $0,94.

Circle representatives said they are not taking any concrete action yet, but are waiting for "clarification of the situation" from US regulators. Currently, about 25% of USDC reserves are held in six US banks, including the bankrupt Silvergate and Silicon Valley. Some sources report problems with Signature Bank, where Circle also has some reserves.

Against this background, the American cryptocurrency exchange Coinbase has suspended the conversion of USDC into fiat currency. Representatives of the site said that the service will be restored on Monday, when banks are open. The largest exchange, Binance, has also suspended the conversion of USDC to BUSD.

Reports have begun to surface that various cryptocurrency exchanges have suspended deposits in USDC. One of the reasons may be the desire to smooth out the impact of sales on the price of a stablecoin. However, the use of smart contracts to exchange USDT, USDC, DAI and other tokens has grown significantly as investors try to get rid of distressed assets. Against this background, the volume of gas for transactions in the Ethereum network has grown to 220 Gwei.

The problem is that if USDC drops to $0,87, then Aave and Compound platforms will start liquidating positions, which will further increase pressure on the stablecoin. The amount of liquidations will be $45,3 million. Fortunately, the situation began to improve - after falling to $0,88, the USDC rate began to gradually recover.

At the same time, many continue to believe in the stablecoin from Circle. So the CEO of hedge fund North Rock Digital Hal Press (Hal Press) said that the organization began to buy back USDC from the price of $0,935, and at the level of $0,88 the hedge fund increased its purchases. He emphasized that Circle's assets are enough to keep the stablecoin at $0,93. The situation also affected arbitrageurs — many began to take loans in USDT in order to trade on the difference in rates in stablecoins. The interest rate for the use of funds almost immediately rose to 100% per annum.

It looks like Tron founder Justin Sun has decided to secure his assets. To do this, he withdrew 82 million USD from the Aave DeFi protocol and exchanged it for DAI. Both stablecoins are now decoupled from the US dollar and trading at roughly the same price, but Justin Sun seems to have more confidence in the DAI token.

The story of one of the traders who, using the KyberSwap decentralized protocol, exchanged assets worth $2,03 million in the 3pool pool in the Curve protocol for only 0,05 USDT, turned out to be extremely sad. Apparently, he mistakenly sent funds through KyberSwap not to the Curve protocol, but to the smart contracts of the Uniswap v2 decentralized exchange, where liquidity turned out to be extremely low - only a few dollars. This pool tracked one of the bots who bought back the stake for $1,45, and to ensure the transaction was completed, the bot increased the fee to 24 ETH.

Previously, Rune Christensen, the founder of the Maker protocol, stated that it was necessary to decouple the DAI stablecoin from the US dollar. He said that about half of the DAI collateral is in USDC, which is quite risky. As events showed, he was right. Interestingly, Twitter CEO Elon Musk has already announced a possible purchase of Silicon Valley and turning it into a digital bank.

Recall that last year, amid the collapse of the Terra ecosystem, many stablecoins lost their peg to the US dollar. In May, the main algorithmic stablecoin UST dumped the dollar, leading to a flurry of liquidations and the collapse of the ecosystem. Later, Tron USDD, Acala USD, HUSD and Neutrino USD lost their peg.

Earlier in the US, the Silvergate cryptocurrency bank collapsed. Bits.Media published a large-scale material on how this and other factors influenced the fall of the cryptocurrency market.