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Experts see no signs of USDC collapse

March 13, 2023
12:58 PM

Despite the massive conversion of USDC stablecoins into alternative digital assets, market experts are confident that the value of a stablecoin is unlikely to fall to critical values.

The collapse of Silicon Valley Bank (SVB) and the subsequent decoupling of the USD Coin (USDC) stablecoin from Circle Financial caused unbalanced crypto investors to panic and expect a scenario similar to the collapse of TerraUSD (UST) to develop. The founder of the CryptoQuant analytical platform, Ki Young Ju, disagrees with this assessment of events and believes that the fears are groundless. On Twitter he expressed the opinion that there is no reason to expect USDC to fall to zero.

Value dropping to zero means major shareholders are selling.

No on-chain proof of $USDC bank run found for now.

— Ki Young Ju (@ki_young_ju) March 11, 2023

Although the market capitalization of USDC stablecoin on Sunday, March 12, fell to $38.8 billion, and the asset itself was trading at $0.95, Ki Yong-ju is confident that Circle has enough financial instruments to restore quotes.

“The situation with USDC is fundamentally different from the collapse of UST in May 2022. The collapse of UST was due to its structure and algorithmic support for underlying digital assets, including BTC and LUNA. At the time of the UST crash, online activity indicated that the Luna Foundation Guard (LFG) was sending bitcoin reserves to exchanges to restore the peg in order to issue huge amounts of LUNA. Since securing USD-UST parity depended on algorithms, any pressure on the underlying assets, BTC or LUNA, automatically led to pressure from sellers, again causing depegging,” says Ki Yong Joo.

Circle announced that it has enough funds to support USDC despite $3.3 billion stuck in SVB. In addition, SVB’s operations have been insured by the Federal Deposit Insurance Agency (FDIC) and the likely payout will be around 94%. For Circle, this means that the company’s loss will not exceed $200 million, and is likely to be covered by interest payments from the US Treasury, which holds the majority of Circle’s reserves.

Source: Cryptocurrency

David

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