The crypto world was rocked on Saturday, March 11, 2023, when several stablecoin assets depegged from their $1 parity. The second-largest stablecoin USDC, issued by Circle Financial, fell below $0.90, reaching a low of $0.877 per coin. Additionally, around five other stablecoins have dropped below the U.S. dollar parity during the early morning (ET) trading sessions on Saturday.
The depegging of USDC was caused by news that $3.3 billion of the cash backing usd coin (USDC) was held at Silicon Valley Bank (SVB). This news has caused USDC to depeg from the U.S. dollar, dropping to a low of $0.877 per coin on Saturday. As of 7:45 a.m. ET, USDC is currently trading at $0.91 per unit, up 3% from the low of $0.87.
In response to the depegging of USDC, several major crypto exchanges, including Binance and Coinbase, have suspended USDC trades. Binance tweeted that they have temporarily suspended auto-conversion of USDC to BUSD due to current market conditions. Coinbase stated that they are temporarily pausing USDC:USD conversions over the weekend while banks are closed. The crypto payment processor Bitpay has also paused USDC payments and debit card loads.
The depegging of USDC has caused a ripple effect of depegging issues for five different stablecoin projects, including GUSD, DAI, FRAX, USDP, and USDD. FRAX is currently trading for $0.91, USDD is swapping for $0.94, USDP is trading for $0.95, DAI is changing hands for $0.92, and GUSD is trading for $0.97 per unit. The largest stablecoin by market capitalization, tether (USDT), has remained within the $0.99 to $1 range since the SVB issues began.
The depegging of USDC and other stablecoins has caused a great deal of concern among crypto advocates. The SEC’s lawsuit against Ripple Labs and its CEO, Brad Garlinghouse, over XRP has also added to the uncertainty. Garlinghouse has stated that the lawsuit “has gone exceedingly well” and that it is important not just for Ripple, but for the entire crypto industry.
It remains to be seen how the depegging of USDC and other stablecoins will affect the crypto market in the long run. In the meantime, crypto exchanges and payment processors are taking precautionary measures to protect their customers. It is also important for crypto users to be aware of the risks associated with stablecoins and to take steps to protect their investments.