USDC Got Depegged Following The SVB Collapse


by @juxtathinka

USDC, the fifth most popular cryptocurrency coin and trusted stablecoin, lost its peg to the US dollar on Saturday, 11th March 2023.

Table of Contents

  1. USDC Got Depegged: What Really Happened?
  2. The Significance of USDC’s Depegging
  3. Question 1: What Will Happen to The USDC Saved In Many Crypto Wallets?
  4. Question 2: Will USDC Bounce Back?
  5. Question 3: What Are The Alternative Stablecoins To Use In These Times?

USDC Got Depegged: What Really Happened?

The coin dropped from $1 to a low of $0.887 in price. This is shocking for most cryptocurrency investors because this has not happened since 2018 when USDC first launched.

The market cap of the token dropped below $40 billion as a 15% decline was recorded. Cryptocurrency exchange platforms like Binance and Coinbase have halted USDC transactions. In addition, other stable coins like DAI and Frax which were backed by USDC have also been depegged. 


The Silicon Valley Bank collapse has been linked to the depeg of USDC. The organization was recently taken over by the Federal Deposit Insurance Corporation. The bank was closed and put under the regulator since Friday. This means that depositors cannot access their deposits until at least Monday.

One of the affected depositors is Circle, the organization behind USDC. Circle disclosed that $ 3.3 billion of its cash reserves for the USDC backup were stored at the Silicon Valley Bank. Then exchanges like Binance and Coinbase announced that they would stop USDC conversions amidst the panic. Despite all the efforts to stop the sale of USDC tokens, there were panic sell outs and USDC lost over 10% of its value. 

The Significance of USDC’s Depegging

USDC’s depegging affected other stable coins: DAI, for example, lost 7.4% of its value because of USDC’s depegging.

DAI depegged to $0.897 because about 51% of its assets were in USDC. USD Digital, otherwise known as USDD is another stablecoin that was affected by the USDC depegging.

The Tron based token dropped by 7.5% to sell at $0.925 while FRAX(Fractional Algorithmic Stablecoin Frax) dipped to $0.885. Fortunately for Tether(USDT), the token was able to stand at $1.08. However, some crypto investors are buying more $USDC with the hope of making more than a 10% profit should the coin repeg.


The main effect the USDC depeg has on the crypto market is that some investors may lose trust in its capability as a stablecoin.

Crypto whales were said to have lost huge amounts of money and even the founder of Huobi, Du Jun said he was also affected.

During the panic, investors tried to swap USDC for DAI to minimize loss. Maker DAO, the organization behind DAI had to file an emergency protocol to prevent minting of DAI and panic selling.

Eventually DAI was affected because some of its reserves were in the USDC and it got depegged. Despite all of these occurrences, the good news is that Circle has some other reserves and so USDC is not likely to fall to zero. The fraction of the reserves affected is only about 8%, so USDC is likely to bounce back. In addition, Circle was clear on what happened and they have put out a statement on Twitter to reassure their investors.

Question 1: What Will Happen to The USDC Saved in Many Crypto Wallets?

There are numerous holders of USDC in different cryptocurrency wallets and what happens to their USDC depends on their decisions.

Since the announcement of the SVB collapse and the 8% USDC reserve being held by the bank, there have been a lot of panic sell outs. People are selling their USDC at 20% losses, for fear of losing out completely. USDC holders are not confident in Circle’s ability to maintain USDC’s peg and so they are swapping their USDC for stablecoins or other cryptocurrencies. The USDC depeg has also further revealed how stablecoins are vulnerable to the market forces. Some low risk investors will pull out their money from cryptocurrency entirely, because of the reduced trust in the stablecoins in general. 


Traders on the other hand are more likely to hold and buy $USDC: some are hopeful that they will make up to 10% profit when the stablecoin repegs. Other tokens such as Bitcoin and Ethereum are speculated to soon drop in price following the USDC depeg, so some traders may seize the opportunity and buy them with the intention of selling much later. A good number of traders even leveraged on Bybit’s future funding rate, making up to 0.3% of their trading fees. Others shorted on USDC, paying 0.4% to borrow the asset and bet on lower prices. On the other hand, some people are waiting to see what happens on Monday, while firmly holding on to the USDC in their wallets. 

Question 2: Will USDC Bounce Back?

The question on most cryptocurrency investors’ minds is “Will USDC bounce back?” The answer is most likely.

The How is what I am curious about. According to a report made by the Chief Investor Officer of Unlimited Efforts, big banks are working on buying Silicon Valley Bank Business. The report claims that the United States Federal Deposit Insurance is planning to recover 95% of uninsured deposits to the acquired, with 50% payouts next week. It is most likely that from next week, Circle and other depositors will get their cash back and that in the long run, they will get over 90% of their money. It is even speculated that in three to six months, Circle and other depositors will get their money back.


Circle on the other hand says that operations are fully normal and the organization is awaiting an update on how the FDIC receivership of the Silicon Valley Bank will affect depositors.

The good news is that 25% of USDC reserves is stored in six banks, out of which SVB is one of these banks. $3.3 billion is what is held at SVB, as compared with $40 billion that is the total $USDC cash reserves. A large proportion of this $40 billion is held in Short Dated US Treasury Portfolios which may be converted to cash.

Circle can buy some $USDC for a profit to reduce loss and reduce the amount of USDC in circulation, as well as the panic selling. This will restore the peg and generate profit for Circle in the long run. USDC will definitely bounce back even if the SVB cash reserves are not released because the remaining percentage of reserves can be used to sustain the peg.

Circle can also garner support from other organizations like banks and Coinbase, which it is affiliated with. The support will come in form of internal and external resources, to help balance the reserves. This may come at a huge financial cost to Circle, but it is possible.

Question 3: What Are The Alternative Stablecoins To Use In These Times

Come what may happen on Monday or whenever the USDC repegs, the alternative stablecoins you can use in the meantime are BUSD and USDT. 

BUSD(Binance USD) is currently available at $1.01 as of Sunday, the 12th of March 2022 on Coinmarketcap. The stablecoin, which was launched by Binance and Paxos, is backed by the New York Department of Financial Services(NYDFS). BUSD reportedly has a circulating supply of about $8.4billion and many investors are holding their tokens now.


aTether(USDT) is a US Dollar backed stablecoin with a market cap of over $73 billion. According to Coinmarketcap, it is selling for $1.01 per token and ranked third on the cryptocurrency watchlist. The circulating supply is well over $72 billion and an unlucky investor lost $2 million to receive $0.5 USDT while trying to swap his USDC. This should remind you how high the demand for tether is: you can get some $USDT in your wallet for the meantime.

It is important in these times that you do not panic: you should do your research and keep yourself updated on the happenings in the crypto space. Your findings will then guide you on the next step to take with your USDC.


This article is not reflective of the opinions of HackerNoon or the organization’s employees. It is a collection of opinions built on research and therefore not to be taken as investment advice. You should do your own research before deciding to buy, hold or sell any of the stablecoins mentioned in this article.

The lead image for this article was generated by HackerNoon’s AI Image Generator via the prompt “a table is on fire with coins on top of it”.