peg

Crypto users turned to DEXs, loaded up on USDC after Silicon Valley Bank crash

The collapse of FTX led to a similar exodus from centralized exchanges, as users worried they may lose access to funds during crises.

The collapse of Silicon Valley Bank saw investors loading their bags with USD Coin (USDC), along with an exodus of funds from centralized exchanges (CEXs) to decentralized exchanges (DEXs).

Outflows from centralized exchanges often spike when the markets are in turmoil, blockchain analysis firm Chainalysis said in a March 16 blog post, as users are likely worried about losing access to their funds when exchanges go down.

Funds sent from CEXs to DEXs following SVB’s collapse. Source: Chainalysis

The Chainalysis data shows that hourly outflows from CEXs to DEXs spiked to over $300 million on March 11, soon after SVB was shut down by a California regulator.

A similar phenomenon was observed during the collapse of cryptocurrency exchange FTX last year, amid fears that the contagion could spread to other crypto firms.

However, data from the blockchain analytics platform Token Terminal suggests that the surge in daily trading volumes for large DEXs was short-lived in both cases.

Daily trading volumes for large DEXs from September to March. Source: Token Terminal

USDC was identified as one of the top assets being moved to DEXs, which Chainalysis said was unsurprising given that USDC depegged after stablecoin issuer Circle announced it had $3.3 billion in reserves stuck on SVB, prompting many CEXs like Coinbase to temporarily halt USDC trading.

Related: Circle clears ‘substantially all’ minting and redemption backlog for USDC

What was surprising, Chainalysis noted, was the surge in USDC acquisitions on large DEXs such as Curve3pool and Uniswap. “Several assets saw large spikes in user acquisition, but none more than USDC,” the blockchain analysis firm wrote.

Token acquisitions on Uniswap from March 7 to March 14. Source: Chainalysis

Chainalysis theorized that this was due to confidence in the stablecoin, with some crypto users loading up on USDC while it was relatively cheap and betting that it would regain its peg — which it did on March 13 according to CoinMarketCap.

USDC’s brief depeg from March 11 to March 13. Source: CoinMarketCap

Circle CEO ‘able to access’ $3.3B of USDC’s reserves at Silicon Valley Bank

Circle’s earlier disclosure that $3.3 billion worth of USDC reserves were held with Silicon Valley Bank resulted in it losing market share to its competitor USDT.

Circle CEO and co-founder, Jeremy Allaire, confirmed that, as of March 13, the stablecoin issuer has been “able to access” its $3.3 billion of funds held with the collapsed bank, Silicon Valley Bank (SVB).

Speaking with Bloomberg Markets on March 14, Allaire said that he believed that “if not everything, very close to everything was able to clear” from the failed lender.

USD Coin (USDC) — the stablecoin issued by Circle — briefly de-pegged following news that $3.3 billion of its cash reserves were stuck on SVB.

The stablecoin’s dollar peg has since recovered, but mass redemptions of USDC have resulted in the market cap of the stablecoin dropping by nearly 10% since March 11 according to TradingView.

The market cap of USDC from March 8 to March 14. Source: TradingView

Meanwhile, throughout the same timeframe, USDC peer Tether (USDT) has recorded a slight increase in its market cap since March 11, climbing by over 1% to $73.03 billion.

Related: USDC depegged because of Silicon Valley Bank, but it’s not going to default

The temporarily locked funds had a significant effect on USDC given the $3.3 billion represented less than 8% of the token’s reserves according to its January reserve report released on March 2.

The report asserted USDC was over 100% collateralized with over 80% of the reserve consisting of short-dated United States Treasury Bills — highly liquid assets which are direct obligations of the U.S. government and considered one of the safest investments globally.

Circle ‘able to access’ $3.3B of USDC reserves at Silicon Valley Bank, CEO says

Circle’s earlier disclosure that $3.3 billion worth of USDC reserves were held with Silicon Valley Bank resulted in it losing market share to its competitor USDT.

Circle CEO and co-founder Jeremy Allaire says that since March 13, the stablecoin issuer has been “able to access” its $3.3 billion of funds held with the collapsed bank, Silicon Valley Bank.

Speaking with Bloomberg Markets on March 14, Allaire said that he believed that “if not everything, very close to everything was able to clear” from the failed lender.

USD Coin (USDC) — the stablecoin issued by Circle — briefly de-pegged following news that $3.3 billion of its cash reserves were stuck on SVB.

The stablecoin’s dollar peg has since recovered, but mass redemptions of USDC have resulted in the market cap of the stablecoin dropping by nearly 10% since March 11, according to TradingView.

The market cap of USDC from March 8 to March 14. Source: TradingView

Meanwhile, throughout the same timeframe, USDC peer Tether (USDT) has recorded a slight increase in its market cap since March 11, climbing by over 1% to $73.03 billion.

Related: USDC depegged because of Silicon Valley Bank, but it’s not going to default

The temporarily locked funds had a significant effect on USDC, even though the $3.3 billion represented less than 8% of the token’s reserves, according to its January reserve report released on March 2.

The report asserted USDC was over 100% collateralized with over 80% of the reserve consisting of short-dated United States Treasury Bills — highly liquid assets thatare direct obligations of the U.S. government and considered one of the safest investments globally.