Primitive Crypto founder Dovey Wan explains why it might be too early to panic amid USDC depegging from U.S. Dollar
While millions of USD Coin (USDC) holders started a “bank run” and swapped their stablecoins to alternatives (largely to its key rival U.S. Dollar Tether), seasoned investor Dovey Wan is sure that the effects of the Silicon Valley Bank collapse on Circle might be exaggerated.
“Don’t panic”: VC investor Dovey Wan to USDC owners
Today, on March 11, 2023, Dovey Wan stated in a tweet that there is no need to panic-swap USD Coin (USDC) to alternative stablecoins or take it from DeFi protocols. She asked vault operators and ordinary holders not to panic.
now it’s the WORST time to unwind or swap USDC, USDC holders and Defi vault operator with USDC don’t panic
1. the actual loss of Circle’s 3.3B deposits will likely take ~25% haircut so <1B, which can be primarily covered by its 2022 income from $32.B short-term T-bill yield imo
— Dovey “Rug The Fiat” Wan (@DoveyWan) March 11, 2023
As per her estimations, the losses Circle might bear are not fatal for the fintech heavyweight. Primarily, they would be covered by short-term U.S. treasuries that constitute the lion’s share of the USDC backing basket.
On Monday, March 13, 2023, when banks are opened, the conversion operations between USD Coin (USDC) and fiat U.S. Dollars will be resumed and its 1:1 peg will be effective again.
It should be noted that by printing time, the USDC price has already recovered from its collapse to $0.85. The asset is trading at $0.91 on major spot exchange platforms.
Her suggestions are echoed by crypto analysts and researchers. Many of them highlight that the FDIC system will be able to erase some part of SVB users’ losses.
How much is actually lost?
It is still unclear how much money is gone forever. Wan opines that it is about $0.8-$1 billion, while analyst DeFi Ignas is sure that about $200 million is lost.
The U.S. regulators are those to blame for the collapse of major crypto-friendly banks and its potential effects on the global finance ecosystem, Wan adds:
The impact to let SVB free fall is a big slap on the face of Fed/Treasury and will significantly ruin financial backbone of tech in US
However, should FDIC take action promptly, the results of this drama might not be as devastating for tech startups and fintech institutions as they seem right now.