Several people and institutions have experienced the impact of the failure of Silicon Valley Bank. The bank is one of the most prominent banks in the United States and has resulted in losses for many.
The ones that were impacted the most were technological startups and businesses such as crypto firms.
Circle is one of the most famous issuers of stable-coin USDC. They announced that SVB holds around $3.3B of their money.
After this announcement, USDC faced redemption since people started talking about its reserves, which resulted in the US Dollar rising.
Though, US Treasury Bills hold the majority of Circle’s reserves which are organized by BlackRock. Several professionals believe that USDC will be able to recuperate and rise again, compared to the dollar.
Ambiguity Increases amongst Investors as Banks Collapse
This week has been chaotic for the American banking sector. Within 48 hours, 2 banks collapsed, which were SVB and Silvergate Bank.
SVB lends money to businesses in Silicon Valley. Following its collapse, its management was transferred to FDIC.
On Friday, the Silicon Valley Bank in California was closed down by the authorities, after the failure of Silvergate Bank, a crypto-friendly bank.
On Wednesday, Silvergate Capital Corporation, which is affiliated with SVB, revealed that they had stopped functioning.
Last year in November, the Silvergate Bank was impacted the most by the failure of FTX. They lost a huge amount of money.
Due to the collapse, they sold around $5.2B of securities at a loss. This was done so they could cover clients’ withdrawals.
On top of it, another bank – Signature Bank – experienced a fall of about 23% in their shares on Friday, and more than that previously.
Circle’s Association with Silicon Valley Bank
Alongside businesses and technological startups being impacted, popular crypto firms also have their funds stuck in SVB, e.g. Circle.
The firm has $3.3B from its $40B reserves at the failed bank. Apparently, they requested money to be transferred on Thursday but it was done a day later.
However, the transaction was not fully processed which is why a chunk of their money is still in the bank – SVB.
Circle was also impacted by the collapse. The company said that they want the services of SVB to continue, even if it’s being managed by others.
With the rise of issues regarding the stablecoin’s reserve, USDC faced redemptions. As per research, on Friday the stablecoin burned approximately $2.34B worth of USDC.
Binance is amongst the most prominent crypto exchanges around the world, and it was affected too.
They revealed that because of market circumstances, they had temporarily stopped the operations of conversion from USDC to BUSD.
Hence, investors shifted from USDC, which pressurized the dollar-peg of the stablecoin. As per research, the price of stablecoin fell to $0.8774 from $1 on Saturday, which was the lowest it has observed.
At this point, USDC’s rate is approximately $0.919, which is 8% low. Though, USDC’s price is recuperating following the decline of $0.86.
Is USDC Genuinely Facing Difficulties?
Circle has 77% of its reserves in T-Bills, whereas 23% of them are in cash at different banks.
About 1/3 of the amount, approximately $3.3B, is at SVB. In a few months, the bank will wind up the commodities and give 10-20% of their value.
As per Hal Press, the value will be more than 10-20% but even that percentage is good enough. That would amount to about 0.8-1.5% loss for USDC. The revealing to Silvergate is about 100mm.
Several banks were utilized by Circle such as Customers Bank, Citizens Trust Bank, New York Community Bank, etc.
Signature Bank is also being used by Circle, but, apart from all other banks mentioned, it is not in a good position at this point.
Even if they experience their worst time, they will still be able to stand at a worth of 93c, which is a good amount.
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