Bitcoin suddenly returned to the price of November 2021 on the morning of March 13, what happened?
BTC/USDC trading pair is “overpriced” on Binance?
On the morning of March 13, the price of the BTC/USDC trading pair suddenly hit the $50,000 mark – the price range of November 2021, before the entire crypto industry plunged into the current bear season.
The price of the Binance BTC/USDC trading pair suddenly reached 50,000 US dollars, and then returned to normal, which is suspect to be caused by insufficient depth. https://t.co/1mIwnkORKt pic.twitter.com/pTnosXybXx
— Wu Blockchain (@WuBlockchain) March 13, 2023
The reason given for the above flash action is that USDC – Circle’s stablecoin is in danger of running out of liquidity.
On March 11, the USDC value fell off the $1 mark and was heavily depeg after Circle’s management unit admits that it may “lose everything” because of its heavy exposure to Silicon Valley Bank. The amount of cash that the company is “contained” here is up to $ 3.3 billion, accounting for 8.25% of total assets of $ 40 billion used as reserves for USDC.
This information created a wave of panic in the community and users rushed to flee to other stablecoins. At the same time, the abundant pools of USDC on DeFi platforms like Curve have been exhausted in turn.
In the midst of the burning oil, Binance has closed the conversion of USDC to BUSD to restrain the switching pressure on the floor. Coinbase quickly followed suitstop giving swap from USDC to USD, until now US banks are open to work again, because it is the weekend.
Binance has temporarily suspended auto-conversion of USDC to BUSD due to current market conditions, specifically related to high inflows & the increasing burden to support the conversion.
This is a normal risk-management procedural step to take while we monitor the situation.
— Binance (@binance) March 11, 2023
The USDC price has lost its peg heavily, falling to $0.882 and affecting other stable coins a lot. This is the deepest depeg of this stablecoin since July 2020, bad than when LUNA-UST or FTX had a crisis.
However, according to the latest announcement, Circle confirmed that it could get back the stuck amount, committed to cover the deficit of collateral assets and resumed converting to USD on Monday morning (US time), still at the same rate. rate 1 USDC to 1 USD. Thanks to that, stablecoin USDC has recoiled close to the 1 USD mark.
In addition, Binance also “takes advantage of this opportunity”, open futures trading USDC/USDT pair with leverage up to 30x. Before that, OKX, Huobi, Bitmex, Bybit each acted similarly, with leverage up to 50x.
The day before, the exchange also added spot trading pairs BNB/USDC, BTC/USDC and ETH/USDC, in an effort to attract more liquidity to the exchange and “rescue” Circle’s stablecoin.
#Binance will add the following trading pairs:
— Binance (@binance) March 12, 2023
Update on Silicon Valley Bank developments
As the media reportedUS officials are racing to ease the health of the domestic financial system, following the collapse of Silicon Valley Bank (SVB) last weekend. After a few days of falling into a serious capital crisis, SVB was shut down by California authorities on March 10 and handed over to the FDIC to liquidate assets. This is the second largest collapse in the history of the US banking industry, after Washington Mutual during the 2008 financial crisis.
In the latest press release from US Treasury Secretary Janet Yellen, US Federal Reserve Chairman Jerome Powell and Federal Deposit Insurance Corporation (FDIC) Chairman Martin J. Gruenberg, all Deposits at SVB will be secured, including those larger than USD 250,000.
The Fed has announced a “bank funding program”, for troubled depository institutions with more relaxed terms than usual, to meet the needs of all depositors. Umbrella frankly rejected the possibility of the government bailing out SVBthe US Secretary of the Treasury still “set aside $25 billion from the Exchange Stabilization Fund” for the Fed’s program, but this money is not expected to be used.
Before the above information, the global financial market and Cryptocurrency industry is gradually flourishing, Bitcoin this morning recovered to $22,600. Circle’s expired stablecoin has also recovered, but has not yet returned to the $1 peg.
But the effort here is only to protect users, not to rescue SVB and set a bad precedent for banks facing similar problems, a government official confirmed with Bloomberg.