- One USDC is currently trading for $0.89
- USDT reached $1.06 against the dollar on Kraken
Early this morning, the cryptocurrency crisis went into high gear as world media reported the news of Silicon Valley Bank's (SVB) failure. Gas fees skyrocketed and stablecoin prices went haywire as investors rushed to move funds around, CoinDesk wrote.
Regulators shut SVB down in a run on the crypto-linked bank. Crypto-friendly bank Silvergate also went down this week.
Bear market enters a darker phase
Soon after top financial regulators met to discuss the fall of SVB, the crypto market became extremely volatile, indicating exacerbation of the more-than-year-long bear market. Many couldn’t imagine an even darker phase.
USDC drops to $0.89
USD Coin, issued by Circle Internet Financial, lost its peg to the US dollar. The USDC/USDT pair dropped to $0.89 on Kraken early this morning. It has never been this low, not even when FTX announced bankruptcy in November 2022. One USDC is still trading for $0.89 according to Coinmarketcap.
Circle: Billions are tied up at SVB
Circle is one of SVB’s leading clients. On Friday, Circle confirmed that reserves of $3.3 billion were “tied up” at SVB. USDC is the second-biggest stablecoin by market cap.
This spells trouble for the stablecoin because the whole asset class derives value from its reserves. If a stablecoin’s market cap is $37 billion, which is currently the case with USDC according to Coinmarketcap, there should be around that much cash or cash-like assets backing it up. Yesterday, its market cap was over $43 billion.
The rise of Tether
Tether (USDT) reached $1.06 against the dollar on Kraken. It had not reached that level in a very long time. Investors are moving money away from USDC. 1 USDT is currently trading for $1.01, Coinmarketcap data show.
Ethereum gas fees soar
The median gas fee for Ethereum went up to 231 gwei. Earlier yesterday, it moved from 20 to 40 gwei.
The repercussions of SVB’s failure on customers are unclear, including large ones like Circle. Elon Musk tweeted he was “open to the idea” of Twitter buying SVB and turning it into a digital bank.
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