Crypto whales reported significant losses following the depegging of USD Coin stablecoin which was linked to Silicon Valley Bank’s collapse. They appear to have taken a series of capital flights in an effort to protect their remaining assets. Du Jun, Huobi Global’s co-founder, posted:
“[I] dodged, LUNA, dodged 3AC, even dodged FTX [and their collapse], but I couldn’t avoid Silvergate, nor SVB and USDC. Asked a few crypto veterans; losses amounted to >$1 billion in stock and deposits, myself included. I’m very upset, and it’s time to cut down on my budget.“
Justin Sun, founder of Tron and blockchain personality, reportedly obtained 82 million USDC from Aave V2, a decentralized finance protocol. This sum was divided between Sun and DAI, the decentralized finance protocol. At press time, these 82 million USDC were worth $75.26 million USD.
On March 11th, MakerDAO, the stablecoin’s issuer, filed an emergency protocol that called for restrictions on the minting of DAI using USDC to prevent panic selling. As one of the largest holders of stablecoins, it had over 3.1 billion USDC worth of reserves which collateralize DAI. Following the depegging, DAI-incorporating crypto projects also suffered losses.
Curve Finance, a popular DeFi protocol used for trading stablecoins, reported an impressive daily trading volume of $5.67 billion USD as a result of these events. To put this into context, the protocol’s total locked value stands at $3.77 Billion. Only a few platforms can handle such a high volume of USDC trade requests.
In one report, a user was awarded 0.05 Tether after having paid over 2.08 million USDC into an exchange, a move that resulted in a permanent loss. KyberSwap announced they are “assisting with funds recovery” and were in contact with the user regarding this matter.
Loki Zeng, a New Huo Technology DeFi analyst, reported that Circle’s reserves include $32.4 billion USD in Treasury instruments, $3.3 Billion USD in Silicon Valley Bank deposits and $7.8 billion USD with various other financial institutions. Zeng had the following to say:
“For USDC to go bust, it needs to satisfy three conditions; there is an abundance of deposits on SVB, and three other at-risk banks, the recovery rate for such deposits remains low, and USDC cannot mitigate such losses.“
Zeng stated that he believes there is a low probability of any major issue and even if there is one, it won’t be as severe as what was experienced with FTX.
Alex Svanevik, chief executive officer of Nansen Blockchain Analytics firm, expressed that Circle and USDC “can make it” through this test. However, Svanevik also revealed that a user had taken 25 million USDC out of their PulseX account and converted it into DAI.
