Circle, the parent company behind the stablecoin USDC, had its $3.3 billion reserves stuck in the failed Silicon Valley Bank. This caused USDC, the second-largest stablecoin in the crypto market, to lose its $1 peg.
However, after some positive developments regarding the SVB hoax, USDC is all set to regain its $1 peg.
The stablecoin is making huge recoveries towards its $1 peg after the Circle CEO Jeremy Allaire announced that $3.3 billion stuck funds at SVB were cleared, and the company is now undergoing talks with its new banking partners.
At the time of writing, USDC has recovered to $0.99 and is solidly going towards a stable $1 peg. This is a 3.3% recovery within 24 hours of the positive tweet from Circle’s CEO.
Due to the uncertainty regarding the SVB issue, USDC plummeted to $0.87 over the weekend. That’s because around $3.3 billion reserves of USDC are locked away in the failed SVB. The SVB was shut down by California’s financial authorities.
This is not the first bad news for Circle, as the company also has undisclosed funds stuck in the Silvergate bank, which has recently filed for bankruptcy.
$25 Billion Bailout Package
Due to the recent failures of SVB and Silvergate, FED announced a $25 billion bailout package to save the depositors and help the troubled banks with liquidity.
Because of the bailout package by FED, 100% of the $3.3 billion USDC reserves were marked safe. Circle is working actively to move the reserves from SVB to BNY Mellon.
After the announcement of the FED bailout package, USDC surged back to $0.99 from $0.87
The collapse of the Signature Bank stopped Circle from processing USDC transactions due to the stoppage of the minting process. While the situation improves, Circle is relying on BNY Mellon for settlements.
Along with the above-mentioned news, the CEO of Circle also announced a collaboration with new banking partners to stabilize USDC once again.
The reassuring statements from FED and Allaire have caused a significant increase in investments toward USDC and DEXs. The crypto market cap has now crossed $1 trillion. The crypto market dropped to $961 billion on March 11 when SVB was shut down by the US financial authorities.
After the sharp recovery following the FED’s announcement of the bailout package, USDC opened at $0.99 on Monday, March 13.
In the last 24 hours, cryptocurrencies like BTC, ETH, SOL, ADA, and MATIC have seen surges ranging from 9% to 15%. This is despite the collapse of Signature Bank. The signature bank was the last pro-cryptocurrency bank operating in the US after the fall of SVB and Silvergate.