On Saturday, March 11th 2023, people were worried because the value of some digital money (called stablecoins) dropped below $1. The second most popular digital money (called USDC and issued by Circle Financial) fell to as low as .877 per coin. Around five other stablecoins also lost their usual value during the morning (Eastern Time) on Saturday.
Stablecoins Under Pressure
On March 11, 2023, people got a bit worried when Circle Financial said that almost $3.3 billion of the money supporting USDC coins was held by Silicon Valley Bank (SVB). As a result, the USDC coins dropped from the usual price until 7:45 am ET, where it reached and stayed at $0.91 per coin, which is still $0.04 lower than its usual rate.
Two of the biggest crypto exchanges in the world, Binance and Coinbase have stopped trades related with USDC. Binance tweeted that they had to suspend auto-conversion of USDC to BUSD because there are a lot of people investing and it’s putting too much strain on their system. This is just a precautionary measure while they keep an eye on what’s happening.
Coinbase and the crypto payment processor Bitpay announced that they will pause USDC:USD conversions from Friday until Monday when banks open. This means that people won’t be able to exchange USDC for USD or use USDC payments and debit cards for the time being. Once the banks are back on Monday, these services will become available again.
The Crypto.com company from Singapore stopped USDC deposits on March 11th as a safety measure. That means no one could turn USDC into USD and people stopped trading USDC pairs. Even though this is happening, they are still allowing people to withdraw their USDC. They’ll keep looking at the situation and will start it up again when they think it’s safe.
Five different kinds of digital money, called stablecoins (GUSD, DAI, FRAX, USDP and USDD) have been affected by a disruption called depegging. Right now, each one is worth just under $1. For example FRAX is trading at $0.91 , USDD swapping at $0.94, USDP at $0.95., DAI exchange rate being $0.92 and GUSD going for $0.97 per unit . The most popular digital coin is Tether (USDT), which has stayed between 99 cents to 1 dollar since the SVB problems started happening.
Do you have any opinions about the difficulties stablecoins face? Please leave your thoughts in the comments.
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