USDC hits all-time low as investors withdraw funds from the stablecoin

USDC hits all-time low as investors withdraw funds from the stablecoin

USDC was hit by a bearish wave following news of the Silicon Valley bank collapse on March 11th. Stablecoin issuer Circle had announced that it had $3.3 billion in deposits with the defunct bank, adding to the uncertainty surrounding USDC.

USDC price falls below $0.90 for the first time

Amid doubts about USDC’s reserves, the coin’s price fell to an all-time low of $0.8774, according to data from CoinMarketCap. Onchain data shows investors liquidating their USDC holdings for other assets.

Rival stablecoin USDT has received a significant inflow of volume over the past 24 hours, which is not surprising. The May 2022 collapse of Terra USD (UST) served as a cautionary tale for many crypto holders who do not want to go through a similar situation with USDC.

Related reading: USDC Issuer Circle announces it was unable to withdraw $3.3 billion from Silicon Valley Bank

Meanwhile, Circle has tried to reassure USDC holders by reassuring them that their funds remain safe. In a March 11 tweet, Circle announced that Silicon Valley Bank is one of six banking partners it uses to manage 25% of USDC’s cash reserves. She further added that she expects clarity from the FDIC on how the SVB bankruptcy would affect depositors.

Still, several crypto firms have limited their exposure to USDC. Binance announced that they would temporarily suspend their automatic USDC to BUSD conversion. Coinbase followed suit and paused USDC conversion to USD until Monday. The exchange noted that during heightened activity, conversions rely on USD remittances from banks conducted during business hours.

Maker DAO also approved an emergency proposal to reduce USDC collateral on its DAI stablecoin. It has been decided that several liquidity pools, including USDC, will have their debt ceiling reduced to zero DAI, meaning they will no longer be able to issue new coins. Additionally, in the so-called “stability modules” exposed to the USDC, the daily issuance limit will be reduced from 950 million DAI to just 250 million.

Related reading: USDC holders gave up over $2 million for 0.05 USDT to avoid crypto crash

What’s next for USDC

At the time of writing, USDC price has recovered 3% in the last 24 hours and is trading at $0.9552. However, the 24-hour trading volume is down 31% to $14 million, while the total market cap stands at around $38 billion.

USDC recovers from all-time low: source @CoinMarketCap

Current sentiment in the crypto market is mixed, with some people highlighting the issues of stablecoin centralization. Likewise, some try to take advantage of this situation to get USDC at a discount. They believe that the USDC will reduce its peg to the dollar and they can take advantage of the current spread. As you can see, opinions are divided and it remains to be seen how the stablecoin will fare in the coming days.

Featured image by Canva.com, chart by CoinmarketCap.com.

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