Requests to convert USDC back to cash have spiked in recent days, with net worth surpassing the $4.5 billion threshold.
According to blockchain data, Circle – the second largest issuer of the cryptocurrency market stablecoin USDC – has recorded massive withdrawals in the past days, after USDC was affected by banking crashes in America and severely depeg.
The crisis began in the middle of last week, when Silicon Valley Bank – a popular banking partner of investment funds and technology startups in the Silicon Valley area (California, USA) – sold off bonds to meet the demand. customer withdrawal. The bank run two days later ended with the US government being forced to intervene and close the bank. Circle revealed that the company was hit hard when it was holding $3.3 billion in cash, accounting for more than 8% of the total collateral for USDC.
The flood of bad news has caused the USDC price to depeg to $0.87 – the lowest value of this stablecoin since its launch in 2018.
Circle company then had to issue a reassuring notice, affirming that it would do everything to make up for the shortfall. On March 13, the US government announced that all depositors at Silicon Valley Bank would be fully compensated by March 14, when the US financial industry began a new working week. Thanks to that guarantee, the USDC price gradually recovered to the $ 1 mark when Circle pledged to restore all $ 3.3 billion held at the bank.
From the time Silicon Valley Bank was confiscated by the US government and closed on Friday (March 10) to early Tuesday morning (March 15), The Block said that more than 6.2 billion USDC was sent back to Circle by holders and asked for cash conversion. During the same period, new USDC issuance was $1.66 billion, bringing the total net withdrawals to over $4.5 billion.
USDC’s market capitalization has dropped from $43.5 billion pre-depeg to $38.2 billion at press time, or $5.3 billion.
Notably, a USDC burning transaction with a value of up to 723 million USD was recorded at dawn on March 15, making this the largest USDC burn transaction in history. The second largest transaction with a value of 656 million USD was also made on March 14.
Pretty sure we just had the largest single USDC burn on record at $723M. pic.twitter.com/Vhj3itleoY
— Steven (@Dogetoshi) March 14, 2023
The massive withdrawal of users despite the stable situation has caused a loss of confidence in Circle and stablecoin USDC which has been seriously affected. Researcher Steven Zhang of The Block comment:
“Despite Circle still processing withdrawals and guaranteeing collateral, USDC holders can be seen as uncertain about the current situation. Circle also holds cash in a variety of other banks, and if those banks are hit with customer withdrawals like Silicon Valley Bank, it could cause USDC to depeg again. The benefit-risk gap when holding USDC is now worth considering.”
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