Analyse Asia with Bernard Leong USDC Depegging and what it means for Web3 and Crypto with Cosmo Jiang
13 snips
Mar 16, 2023 AI Snips
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Episode notes
Concentrated Crypto Deposits Fuel Bank Runs
- Silvergate collapsed due to concentrated crypto deposits and a sudden two-thirds deposit outflow after market shocks.
- Selling securities to meet withdrawals forced losses and triggered a classic bank run that destroyed regulatory capital.
How USDC Maintains Its Dollar Peg
- USDC is backed by cash and US treasuries held in segregated custodial accounts and attested monthly by Deloitte.
- Market confidence plus redeemability mechanisms keep USDC near a $1 peg in normal conditions.
Banking Disruption Broke USDC Confidence
- SVB failure revealed $3.3B of Circle reserves stuck at Silicon Valley Bank, about 8% of USDC reserves.
- That operational bank disruption plus halted exchange conversions caused USDC to trade as low as $0.88.