Investors withdraw $3 billion from USDC stablecoin in three days

Investors withdrew about $3 billion from the USDC stablecoin in three days, the firm behind the digital asset said on Thursday, as investors rushed to redeem their holdings following the collapse of Silicon Valley Bank.

The USDC broke its peg to the dollar on Saturday after crypto trader Circle revealed $3.3 billion of the currency’s reserves were in the SVB.

The stablecoin fell as low as $0.88, according to data from CoinGecko, but returned to $1 on Monday. Circle has announced that it will allow the stablecoin to be automatically redeemed through a new banking relationship, with Cross River Bank.

Stablecoins are cryptocurrencies designed to maintain a constant exchange rate with traditional currencies. USDC is the second largest stablecoin with a market cap of $37.6 billion.

From Monday to Wednesday, Circle processed $3.8 billion in USDC redemptions, with investors exchanging their tokens for US dollars and creating another $8 million worth of tokens, meaning investors withdrew about $3 billion in total over the three days.

Last week, according to data from CoinGecko, investors withdrew a net $6 billion from the coin.

“Last week’s events impacted USDC’s liquidity operations,” Circle said.

“We will continue efforts to add more transaction banking partners.”

Moody’s analysts said in a statement that the USDC leak highlights that links between the cryptocurrency world and traditional finance are unpredictable and “could lead financial institutions to reconsider partnering with stablecoin operators.”

“This scenario increases stablecoins’ dependence on fewer institutions and limits their ability to maintain stable exchange rates,” Moody’s said.

Source: Terra

Rose

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