Centralized
exchange trading volumes for the USDC/USDT stablecoin pair surged by 828% to
$6.1 billion on 11 March 2023, as investors sought to switch from USDC to other tokens after the fallout of Silicon Valley Bank (SVB) in which Circle,
the stablecoin issuer, held $3.3 billion of reserves.
According
to the newest market analysis published by CryptoCompare, the SVB collapse has lifted
the trading volume of the popular stablecoin, including decentralized
exchanges. CryptoCompare also reported an increase in USDC trading against the
US dollar.
SVB was
shut down by the California Department of Financial Protection and Innovation
on 10 March without any apparent reason for the sudden move. Reports suggest
that the bank was facing severe liquidity problems and was on the verge of
collapse. It emerged that the issuer of the USDC stablecoin, Circle, holds $3.3
billion (8%) of the funds backing the USDC in SVB.
The event
triggered a market panic, leading investors to sell off their USDC tokens and
switch to other commonly used stablecoins or the US dollar. Consequently, the
stablecoin’s value disconnected from its fixed exchange rate with the USD. At
its lowest point, USDC traded for only 88 cents during the Saturday session.
However, the situation stabilized on Monday, and the exchange rate has now
reached $0.9994.
USDC’s Peg Falls to an All-Time Low of $0.8726. Source: CryptoCompare
High USDC Volatility and Visible
Jump in Trading Volumes
Although
the situation seems to be contained, the past weekend brought above-average
activity in the cryptocurrency market, as analyzed by CryptoCompare. Trading
activity on the USDC/USDT pair increased more than eightfold, exceeding $6.1
billion.
“On 11
March, USDC-USDT centralized exchange trading volumes soared 828% to $6.1bn, as
market participants looked to flee USDC and migrate to a ‘safer’ stablecoin.
The USDC-USD trading pair also saw a substantial increase in trading volume
during this time,” CryptoCompare commented in its report.
USDC-USDT Exchange Volumes Soar 828%. Source: CryptoCompare
There was a
significant increase in decentralized exchange (DEX) volumes as well, from
$7.14 billion on 10 March to $25.0 billion on 11 March, indicating a 249%
surge. Alongside this, Ethereum gas fees observed a new high in 2023, reaching
101 Gwei, as there was an uptick in blockchain network activity.
Despite the
temporary collapse of the market and its liquidity, there were no negative USDC
outflows from traditional cryptocurrency exchanges. Ultimately, the overall fund
flows turned positive for Circle’s stablecoin.
“We
attribute this to some traders trying to make arbitrage profit from the USDC
peg as seen when analyzing trades using CryptoCompare trade data,”
CryptoCompare explained.
CryptoCompare’s
analysis concludes that recent events have shown that crypto is still heavily
dependent on traditional finance, exposing the fragility of centralized
stablecoins. Circle has proven to effectively manage its collateral reserves,
which is essential for long-term confidence in its ability to navigate
potential issues with traditional banking.
However, the
collapse of SVB highlights the impact of the Federal Reserve’s (Fed) interest
rate hikes on the financial system, which has caused a Fed-induced crisis due
to “inaccurate interest rate forecasts” and “the fastest
interest rate hikes” in the US monetary history.
Centralized
exchange trading volumes for the USDC/USDT stablecoin pair surged by 828% to
$6.1 billion on 11 March 2023, as investors sought to switch from USDC to other tokens after the fallout of Silicon Valley Bank (SVB) in which Circle,
the stablecoin issuer, held $3.3 billion of reserves.
According
to the newest market analysis published by CryptoCompare, the SVB collapse has lifted
the trading volume of the popular stablecoin, including decentralized
exchanges. CryptoCompare also reported an increase in USDC trading against the
US dollar.
SVB was
shut down by the California Department of Financial Protection and Innovation
on 10 March without any apparent reason for the sudden move. Reports suggest
that the bank was facing severe liquidity problems and was on the verge of
collapse. It emerged that the issuer of the USDC stablecoin, Circle, holds $3.3
billion (8%) of the funds backing the USDC in SVB.
The event
triggered a market panic, leading investors to sell off their USDC tokens and
switch to other commonly used stablecoins or the US dollar. Consequently, the
stablecoin’s value disconnected from its fixed exchange rate with the USD. At
its lowest point, USDC traded for only 88 cents during the Saturday session.
However, the situation stabilized on Monday, and the exchange rate has now
reached $0.9994.
USDC’s Peg Falls to an All-Time Low of $0.8726. Source: CryptoCompare
High USDC Volatility and Visible
Jump in Trading Volumes
Although
the situation seems to be contained, the past weekend brought above-average
activity in the cryptocurrency market, as analyzed by CryptoCompare. Trading
activity on the USDC/USDT pair increased more than eightfold, exceeding $6.1
billion.
“On 11
March, USDC-USDT centralized exchange trading volumes soared 828% to $6.1bn, as
market participants looked to flee USDC and migrate to a ‘safer’ stablecoin.
The USDC-USD trading pair also saw a substantial increase in trading volume
during this time,” CryptoCompare commented in its report.
USDC-USDT Exchange Volumes Soar 828%. Source: CryptoCompare
There was a
significant increase in decentralized exchange (DEX) volumes as well, from
$7.14 billion on 10 March to $25.0 billion on 11 March, indicating a 249%
surge. Alongside this, Ethereum gas fees observed a new high in 2023, reaching
101 Gwei, as there was an uptick in blockchain network activity.
Despite the
temporary collapse of the market and its liquidity, there were no negative USDC
outflows from traditional cryptocurrency exchanges. Ultimately, the overall fund
flows turned positive for Circle’s stablecoin.
“We
attribute this to some traders trying to make arbitrage profit from the USDC
peg as seen when analyzing trades using CryptoCompare trade data,”
CryptoCompare explained.
CryptoCompare’s
analysis concludes that recent events have shown that crypto is still heavily
dependent on traditional finance, exposing the fragility of centralized
stablecoins. Circle has proven to effectively manage its collateral reserves,
which is essential for long-term confidence in its ability to navigate
potential issues with traditional banking.
However, the
collapse of SVB highlights the impact of the Federal Reserve’s (Fed) interest
rate hikes on the financial system, which has caused a Fed-induced crisis due
to “inaccurate interest rate forecasts” and “the fastest
interest rate hikes” in the US monetary history.