USDC

Tether market cap eyes record high after regaining 65% stablecoin dominance

The market capitalization of Tether is nearly a billion dollars away from reaching a new lifetime peak while rival stablecoins struggle.

Tether has emerged as a clear winner amid the ongoing banking crisis and crypto crackdown in the United States.

On April 17, the U.S. dollar-pegged stablecoin’s circulating market valuation reached nearly $81 billion, just 1.5% below its record high of $82.29 billion from a year ago. It has grown about 20% year-to-date (YTD) already and is now eyeing new all-time highs.

USDT market capitalization monthly chart. Source: TradingView

Tether rivals hit new yearly lows

Tether’s (USDT) growth came as it ate up the market share of its stablecoin rivals, USD Coin (USDC) and Binance USD (BUSD). That is due to crypto traders’ belief that Tether’s operations have no exposure to the potential banking crisis contagion.

For instance, the circulating market capitalization of USD Coin, the second-largest stablecoin, has dropped over 25% YTD to $31.82 billion, its lowest level since October 2021, primarily due to its exposure to the failed Silicon Valley Bank. 

USDC market capitalization monthly chart. Source: TradingView

BUSD, on the other hand, has witnessed a 60% drop in market capitalization in 2023 to $6.68 billion, its lowest since April 2021, as the New York Department of Financial Services ordered Paxos, a regional crypto firm, to stop its mint and issuance. 

Moreover, the U.S. Securities and Exchange Commission asserts that BUSD is a “security.” Conversely, the U.S. Commodity Futures Trading Commission alleges that the stablecoin is a “commodity.”

This capital shift likely helped Tether boost its dominance above 65% in the global stablecoin sector for the first time since May 2021, according to Glassnode data.

Stablecoin supply dominance. Source: Glassnode

On April 16, the U.S. House Financial Services Committee published a draft version of its potential stablecoin bill to create definitions for issuers. It says that non-U.S. firms like Tether must register if they cater to Americans, albeit without mentioning the specific agency that would regulate stablecoins.

Exchange stablecoin supply lowest since June 2021

Despite Tether’s market capitalization growth, its supply across crypto exchanges has been declining in 2023.

Related: BTC price heading under $30K? 5 things to know in Bitcoin this week

As of April 16, cryptocurrency exchanges had 12.94 billion USDT in their reserves compared with 17.89 billion USDT at the year’s beginning. On the whole, the stablecoin supply across exchanges has dropped 42% YTD to $21.53 billion.

Stablecoin supply across exchanges. Source: Glassnode

This dynamic coincides with the 21% YTD increase in the crypto market’s valuation from $1 trillion in January to $1.21 trillion, suggesting that Q1 has seen a trend shift from “safe” stablecoins to risk-on cryptocurrencies.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

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

The stablecoin issuer says that from March 13 and March 15, it redeemed $3.8 billion USDC and minted $0.8 billion USDC.

Stablecoin issuer Circle says it has cleared “substantially all” of the redemption and minting requests for its stablecoin, USD Coin (USDC).

In a March 15 operational update, Circle said between the morning of March 13 to the close of banking business in the United States on March 15, it had redeemed $3.8 billion USDC and minted $0.8 billion USDC.

Last week, Circle was hit with a bank run after disclosing it had $3.3 billion worth of stablecoin reserves in the now-collapsed Silicon Valley Bank which resulted in USDC losing its dollar peg.

“The events of the past week have impacted the liquidity operations for USDC,” Circle wrote in its update. It added it worked to “re-initiate services with alternative banking partners, particularly payment and USDC redemption services.”

Circle said it went live with a new banking partner for U.S. wires on March 14 and used the same partner “for international wires to and from 19 countries” on March 15. It expects “to bring more capabilities” online by March 16.

Related: Recent contagion was ‘TradFi to crypto’ and not vice versa — Circle policy director

Cross River Bank, which also services Circle’s peer firm Coinbase, was disclosed as the firm’s new commercial banking partner for producing and redeeming USDC on March 13. Circle also expanded ties with its existing custodian, the Bank of New York Mellon (BNY Mellon).

The announcement comes after a turbulent period for USDC that caused many to lose funds amid a flight to perceived safety from what was, at the time, a rapidly declining asset.

One unfortunate crypto user paid over $2 million to receive $0.05 of USDT in their apparent panic to cash out of the crash. An analysis revealed they possibly forgot to set slippage on their transaction, allowing a bot to net a significant profit.

Update (March 16, 3:30 AM UTC): This article has been updated to include further information on recent USDC-related events.

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.

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.

Debtors saved over $100M using de-pegged stablecoins to repay loans

Debtors jumped on the opportunity to grab a discount on their loan repayments when USDC and DAI de-pegged from the dollar.

The depegging of USD Coin (USDC) and Dai (DAI) from the United States dollar prompted a frenzy of loan repayments over the weekend, allowing debtors to save a total of more than $100 million on their loans.

Following the collapse of Silicon Valley Bank on March 10, the USDC price dropped to lows of $0.87 on March 11 amid concerns about its reserves being locked at SVB.

MakerDAO’s stablecoin DAI also de-pegged briefly, going as low as $0.88 on March 11, according to CoinGecko.

The USDC price briefly dropped to lows of $0.87 on March. 11. Source: Cointelegraph

The depegging, in the backdrop of broader crypto turmoil, led to more than $2 billion in loan repayments on March 11 on decentralized lending protocols Aave and Compound — with more than half made in USDC, according to a report by digital assets data provider Kaiko. 

Another $500 million in debts were paid in DAI on the same day, it noted.

Digital assets data provider Kaiko found over $1 billion in USDC loan repayments on March. 11. Source: Kaiko

This tapered off as both USDC and DAI started heading back toward their peg. The following days did not have anywhere near as many repayments, with a rough total of only $500 million in loan repayments across Tether (USDT), USDC, DAI and other coins on March 12, and roughly half of that on March 13.

Blockchain analytics firm Flipside Crypto estimates that USDC debtors saved $84 million as a result of paying back loans while the stablecoin was de-pegged, while those using DAI saved $20.8 million.

Debtors used de-pegged stablecoins to save millions in loan repayments. Source: Flipside Crypto

“Overall, DeFi markets experienced two days of huge price dislocations that generated countless arbitrage opportunities across the ecosystem, and highlighted the importance of USDC,” the Kaiko report said. 

Related: USDC depegged, but it’s not going to default

The depegging of USDC also led MakerDAO to reconsider its exposure to USDC, as crypto projects incorporating DAI in their tokenomics suffered losses due to a chain reaction.

Circle’s USDC began its climb back to $1 following confirmation from CEO Jeremy Allaire that its reserves were safe and the firm had new banking partners lined up, along with government assurances that depositors of SVB would be made whole.

According to CoinGecko data, USDC was sitting at $0.99 at the time of writing.

USDC depegged, but it’s not going to default

USD Coin is going to survive Silicon Valley Bank’s collapse. But it should inspire advocates of cryptocurrency to prepare for future systemic shocks.

Over the past week, investors understandably became concerned over the news that billions of dollars backing USD Coin (USDC) — the second-largest stablecoin — were locked up in the distressed Silicon Valley Bank (SVB). The market reacted violently, causing USDC to lose its dollar peg. But while the concern was understandable, it has become clear that USDC creator Circle will regain full access to its funds. The crypto community can breathe easily.

It started as a tremor

Hundreds of sensors are buried on the ocean floor off the coast of Japan. Trained to detect the slightest hints of a tremor, they wire data at light speed to laboratories on the main island. In the event of the fault lines that bifurcate the ocean trenches hitting violently together, the seismic activity will be detected, giving islanders precious minutes in which to retreat to high ground before a tsunami hits.

Last week, the seismograph that records the financial health of the United States banking system began plotting jagged lines. Something had broken deep beneath the surface, and it was clear that trouble was on its way. On Friday, reports emerged that Silicon Valley Bank, relied on by thousands of tech startups including crypto companies, had run out of cash. Wires sent in the night before for processing were not being fulfilled.

The seismograph, which had already detected an uptick in activity with the collapse of Silvergate Bank days earlier, had begun to shake. It was clear that a tsunami was brewing. Over the weekend, with U.S. banks closed and SVB customers anxiously waiting for news of a bailout to protect their deposits, pressure has mounted on high-profile businesses to disclose their holdings.

Circle, the issuer of the 100% fiat collateralized USDC stablecoin, is one of them. On Saturday, it released a statement confirming that $3.3 billion of the $40 billion used to back USDC is held with Silicon Valley Bank. Rather than reassuring investors that the bulk of Circle’s funds is safe, the revelation had the reverse effect: Confidence in USDC wobbled, and the stablecoin, which had clung closely to its $1 peg throughout its four-year lifespan, began to fall.

Related: Kraken staking ban is another nail in crypto’s coffin — And that’s a good thing

People clamored to short USDC, with major derivatives trading platforms even opening a dedicated market for the purpose. Arbitrageurs began profiting from price inefficiencies as panicked USDC holders sought sanctuary in other stablecoins at any cost, and other stablecoins, in turn, such as the USDC-collateralized Frax and Dai (DAI), also lost their peg. It’s clear there’s a wave heading for the shore.

Rumors of USDC’s demise have been exaggerated

While SVB shareholders are not slated for a bailout, the U.S. federal government announced it would cover the bank’s uninsured depositors. Circle will be fine. But what about USDC? Over the weekend, the once-stable token plunged to a low of $0.88 as traders tried to price in USDC being under-collateralized. As of March 13, USDC has recovered to a range between $0.99 and $1.01.

Related: Should Bored Ape buyers be legally entitled to refunds?

As the dust settles, however, questions hang over not just USDC but all stablecoins and their ability to maintain their pegs through thick and thin. The panic over Silicon Valley Bank is almost over. Now, the onus is on the crypto industry to regain trust in the stablecoins that are the bedrock of the business. “Don’t trust, verify” is crypto’s core mantra. And yet, for all the cryptographic proof, it remains a business, like TradFi, that runs on faith.

It may not have developed into a Richter-shattering earthquake, but the tremors caused by Circle’s exposure to SVB have reverberated through the crypto sphere. Achieving stability in an unstable world is a challenge that’s bigger than crypto. Preventing future systemic shocks calls for a rethink of the tenets we once held to be infallible.

Gracy Chen is the managing director of the cryptocurrency exchange Bitget where she covers matters of market expansion, business strategy and corporate development. Before joining Bitget, she held executive roles at XRSPACE, a VR technology company, and was an early investor in BitKeep, Asia’s leading decentralized wallet. In 2015, Gracy was named a Global Shaper by the World Economic Forum. A graduate of the National University of Singapore, she is earning an MBA degree at the Massachusetts Institute of Technology.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Bitcoin futures premium falls to lowest level in a year, triggering traders’ alerts

On March 12, Bitcoin futures traded 5.5% below regular spot exchanges, causing volatility in derivatives markets.

The price of Bitcoin (BTC) increased by 14.4% between March 12-13 after it was confirmed that financial regulators had rescued depositors in the failing Silicon Valley Bank (SVB). The intraday high of $24,610 may not have lasted long, but $24,000 represents a 45% increase year-to-date.

On March 12, U.S. Treasury Secretary Janet Yellen, Federal Reserve Chairman Jerome Powell, and Federal Deposit Insurance Corporation (FDIC) Chair Martin Gruenberg issued a joint statement to reassure SVB depositors.

Regulators also announced a systemic risk exception for Signature Bank (SBNY), an intervention designed to compensate depositors for losses incurred by the previous management. Signature Bank was one of the most prominent financial institutions serving the cryptocurrency industry alongside Silvergate Bank, which announced its voluntary liquidation last week.

To avert a larger crisis, the Fed and Treasury devised an emergency program to supplement all deposits at Signature Bank and Silicon Valley Bank with funds from the Fed’s emergency lending authority. According to the regulators’ joint statement, “no losses will be borne by the taxpayer,” although the strategy for deploying Treasury assets is questionable.

The stablecoin USD Coin (USDC) also caused significant turmoil in the cryptocurrency industry after breaking below its 1:1 peg with the U.S. dollar on March 10. The fear grew after the issuing management company Circle confirmed that $3.3 billion in reserves were held at Silicon Valley Bank.

Such an unusual movement caused price distortion across exchanges, prompting Binance and Coinbase to disable the automatic conversion of the USDC stablecoin. The decoupling from $1 bottomed near $0.87 in the early hours of March 11 and was restored to $0.98 after the FDIC’s successful intervention in the SVB crisis was confirmed.

Let’s take a look at Bitcoin derivatives metrics to see where professional traders stand in the current market.

Bitcoin futures metrics flipped to extreme fear

Bitcoin quarterly futures are popular among whales and arbitrage desks. These fixed-month contracts typically trade at a slight premium to spot markets, indicating that sellers are asking for more money to delay settlement for a longer period.

As a result, futures contracts in healthy markets should trade at a 5-to-10% annualized premium — a situation known as contango, which is not unique to crypto markets.

Bitcoin 3-month futures annualized premium. Source: Laevitas.ch

The chart shows traders had been neutral-to-bearish until March 10 as the basis indicator oscillated between 2.5% and 5%. However, the situation quickly changed in the early hours of March 11 as the stablecoin USDC decoupled and cryptocurrency exchanges were forced to change their conversion mechanisms.

Consequently, the Bitcoin three-month futures premium turned into a discount, otherwise known as backwardation. Such movement is highly unusual and reflects investors’ lack of trust in intermediaries or extreme pessimism towards the underlying asset. Even as the USDC stablecoin price approaches $0.995, the current 0% premium indicates a lack of leverage buying demand for Bitcoin via futures instruments.

Related: Crypto investment products see largest outflows on record amid SVB collapse

Crypto-fiat gateways are key to reclaiming improved market dynamics

By reclaiming the $24,000 support, Bitcoin has restored levels unseen since the Silvergate Bank stock price collapse on March 1 after the delayed filing of its annual 10-K financial report. Moreover, crypto exchanges and stablecoin providers were forced to suspend U.S. dollar deposits, with the closure of Signature Bank affecting Okcoin.

Banking options for crypto firms, including exchanges, are likely to become more limited as traditional banks remain wary of the sector. According to some analysts, U.S. regulators are purposefully discouraging major banks from doing business with cryptocurrency exchanges.

Fiat gateway on and off ramps are critical for stablecoins, market markers and cryptocurrency exchanges for a variety of reasons. The ability to convert Bitcoin to cash and vice versa is critical for their day-to-day operations, so the longer it takes to find new banking partners, the more difficult it is for stablecoins to allow redemptions and exchanges in order to maintain a high level of liquidity.

Derivatives metrics may have recovered from the initial banking crisis contagion risk, but they still indicate Bitcoin bulls’ lack of confidence in a long-term recovery.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

314M USDC sent to null address as redemptions begin: Report

The token is on the verge of restoring its 1:1 peg with the U.S. dollar after falling to a historic low of $0.87 per token two days prior.

According to Web3 analytics platform Watchers, a total of 314.167 million USD Coin (USDC) was sent by its issuer, Circle, to the Ethereum null address with header 0x00 on March 13. The null address is typically used to remove tokens from circulation via one-way transactions.

On March 12, Circle announced that following a joint announcement by U.S. Treasury Secretary Janet Yellen and other regulators, all depositors with Silicon Valley Bank (SVB) — representing $3.3 billion, or 8% of the total USDC reserve — would be “fully available,” when U.S. banks opened on March 13. Jeremy Allaire, co-founder and CEO of Circle, commented:

“Trust, safety and 1:1 redeemability of all USDC in circulation is of paramount importance to Circle, even in the face of bank contagion affecting crypto markets. We are heartened to see the U.S. government and financial regulators take crucial steps to mitigate risks extending from the banking system.”

USD Coin was designed to be 1:1 redeemable with U.S. dollars, and its tokenomics are dictated by fiat collaterals in proportion with new token minting and burning. On March 10, the token depegged after Circle’s custodian bank, SVB, suffered a bank run after a series of failed leveraged long positions on the U.S. Treasury, forcing federal regulators, including the Federal Deposit Insurance Corporation, to intervene.

At the time of publication, USDC was trading at $0.9958, compared with a historic low of $0.87 two days prior. Circle has stated that in the event of a shortfall, it will use corporate funds and external capital, if necessary, to defend USDC. Some crypto whales reportedly sold USDC at the bottom during the depegging event, causing heavy losses.

Bitcoin price flash spikes to $50K on Binance after USD Coin peg snaps

The market frenzy that started with the Silicon Valley Bank collapse is pushing the BTC price higher, with some casualties left behind.

The panic caused due to USD Coin’s (USDC) depeg from the U.S. dollar manifested itself in a wrong order, costing traders $50,000 per Bitcoin (BTC), albeit for several minutes.

Bitcoin price sees $50K in “fat finger” error 

The BTC/USDC pair on Binance flash spiked to $50,000 on March 12 around 7:00 pm UTC. The reason for the impulse spike is unknown and was likely due to a “fat finger” trade of a large order.

BTC/USDC hourly price chart on Binance. Source: TradingView

The potential reason for the flash spike is likely due to thin order books for the newly launched BTC/USDC pair on Binance. The exchange listed the pair only a few hours before the impulse price surge.

According to a trader on Crypto Twitter, it is likely that a Bitcoin market order ate through the limit sell-orders on the pair up to $50,000.

The pair’s trading price returned toward the market spot price of around $22,000 in minutes following the spike, suggesting it was an isolated incident. Fortunately, the futures market remained unaffected by the spot BTC/USDC pair; otherwise, it could have triggered massive short-side liquidations.

But this isn’t the first time cryptocurrency exchanges have seen flash crashes and spikes. Multiple exchanges in the past had similar issues, inciting anger and refund requests from affected customers.

Related: Deribit to pay users $1.3M after Bitcoin price ‘flash crash’ to $7.7K

In August 2017, a flash crash on GDAX, now called Coinbase Pro, saw Ether (ETH) prices plummet to as low as $0.1 due to a customer error. Ether was trading at around $300 elsewhere at the time.

USDC stablecoin peg recovers

USDC’s value dropped to lows of $0.87 on March 11 after Circle, the issuer of USDC, revealed that it had $3.3 billion exposure to the defunct Silicon Valley Bank (SVB).

USDC trading pairs have been unstable on other exchanges since the SVB revelations. On March 11, the BTC/USDC pair on Kraken spiked to over $26,000 due to fears about the collapse of USDC.

At the time, USDC was trading at a 10% discount, which would have priced Bitcoin at around $22,200. However, the spike toward $26,000 indicates that panic causes serious volatility.

The fears amplified over the weekend due to uncertainty around the fate of SVB depositors. In response, the United States Treasury, Federal Reserve, and Federal Deposit Insurance Corporation decided to bail out the customers of SVB and Signature Bank but not the shareholders and other stakeholders, restoring market confidence for now.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

USDC bounces back toward $1 peg after Fed announcement

Positive developments concerning Circle’s $3.3 billion worth of reserves held at Silicon Valley Bank and its new banking partners have seen USDC climb back toward its $1 peg.

Circle’s stablecoin USD Coin (USDC) is climbing back to its $1 peg following confirmation from CEO Jeremy Allaire that its reserves are safe and the firm has new banking partners lined up at “banking open tomorrow morning.”

According to CoinGecko data, USDC is up 3.3% over the past 24 hours to sit at $0.99 at the time of writing.

USDC price chart. Source: CoinGecko

The price dropped to as low as $0.87 over the weekend amid concerns about $3.3 billion worth of USDC reserves being held at Silicon Valley Bank, which was shut down by the California Department of Financial Protection and Innovation on March 10.

Circle also has an undisclosed amount of reserves stuck at the recently bankrupted Silvergate.

In a March 12 Twitter thread, Allaire praised the U.S. government and Federal Reserve for its $25 billion funding program to support liquidity-troubled banks such as SVB:

“100% of USDC reserves are also safe and secure, and we will complete our transfer for remaining SVB cash to BNY Mellon. As previously shared, liquidity operations for USDC will resume at banking open tomorrow morning.”

Allaire added that following the implosion of crypto-friendly Signature Bank on March 12, Circle is no longer able to process USDC minting and redemption through SigNet and that the firm will be temporarily “relying on settlements through BNY Mellon.”

The CEO outlined that things will move quickly in this regard however, as he revealed that Circle “bringing on a new transaction banking partner with automated minting and redemption potentially as soon as tomorrow.”

The statement from Allaire and the Federal Reserve announcements has been followed by a significant pump for asset prices across the board, with the total crypto market cap now above $1 trillion following its sharp drop to $961 billion on March 11.

Assets such as Bitcoin (BTC), Ether (ETH), Cardano (ADA), Polygon (MATIC) and Solana (SOL) have pumped a hefty 10.6%, 11.4%, 12.3%, 11.7% and 15.1% in the past 24 hours alone.

Notably this is despite Signature Bank collapsing.

Signature was seen as the last crypto-friendly bank standing in the U.S. following the closure of Silvergate and SVB, and it is now unclear what the major banking on- and off-ramps into crypto are.