USDC Stablecoin and Crypto Market go haywire after Silicon Valley Bank collapses

The cryptocurrency crisis gained momentum early Saturday as the failure of Silicon Valley Bank (SVB) threw some of the industry’s core leadership into disarray.

In the aftermath, Treasury Secretary Janet Yellen convened top financial regulators to discuss the collapse of the SVB. Not long after, crypto markets went into turmoil, suggesting that the year-long bear market has entered an even darker phase.

There are echoes of the global financial crisis of 2008, when bad news was followed by even worse news. Although in the case of crypto, which has no central bank like the Federal Reserve that can save the industry, the question lingers: how will it end?

Circle Internet Financial’s USDC stablecoin is hugely decoupled from its $1 target price — a poignant development for a product designed as a place for investors to safely park money. The USDC/USDT pair (which tracks Circle’s coin against the larger one issued by Tether) fell to just $0.89 on the Kraken exchange at 03:49 UTC Saturday — much lower than ever amid market tensions that followed the FTX debacle in November.

The financial services company confirmed late Friday that approximately $3.3 billion of reserves to support the world’s second-largest stablecoin were tied up with SVB.

Stablecoins derive their value from those reserves; if someone is worth more than $43 billion — as USDC was earlier on Friday — there should be about that much cash or cash fixed income stashed away somewhere to back that up. USDC’s market cap has now dropped below $40 billion.

Gas costs, which measure how much it costs to complete an on-chain transaction, rose. For Ethereum, the median gas fee jumped as high as about 231 gwei, compared to the range of about 20 to 40 seen earlier Friday, according to

Crypto was born in the aftermath of – and for some in response to – the 2008 crisis. Satoshi Nakamoto’s Bitcoin paper debuted in a world where governments had just supported the financial system by pouring money into it. Crypto lacks such a centralized authority. If SVB clients, including Circle and its USDC stablecoin, are forced to cut their funds, the consequences are unclear.

So who, if anyone, will intervene?

When Razer CEO Min-Liang Tan tweeted late Friday that Twitter should buy SVB and become a digital bank, billionaire Elon Musk tweeted in response“I’m open to the idea.”






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