2023-03-11 13:59:51
USDC HAS DE-PEGGED - WTF IS GOING ON?Firstly, does this affect Minterest?
No. Minterest's Chainlink pricing oracle is functioning exactly as it should. Also at this stage where collateral factors are limited to 20% there is no risk of liquidations.
I am getting tired though of TradFi continually crapping on DeFi, and then US regulators blaming crypto to divert attention from them failing to do their job, just like FTX.
It is worth noticing during market volatility like this there is one creditor who always gets paid 100% of the time – lending protocols. Code is law, and much safer than humans.
USDC’s de-peg is due to yet another TradFi collapse, Silicon Valley Bank which is
THE bank for tech startups and tech VCs.
Who is Silicon Valley Bank?
Firstly, SVB going down is not Lehmann Brothers. SBV is much smaller, with about $200B in assets and not integrated into the global banking system like Lehmann was. Lehmann's collapse was due to a structural failure, given investment banks for years had been selling hundreds of billions of toxic assets packaged as safe and stable to traditional funds.
US banks are better more capitalised now than they have been in decades, so SVB is not going to cause a bank sector contagion.
VC Panic Killed SBVLast Wednesday SBV was well capitalised, but it came out with a surprise announcement it needed to raise $2.25 billion to shore up its balance sheet. Tech companies withdrawals caused by a toughening market environment forced it to sell long term US treasuries, which given recent interest rate rises tanked their value and forced the sales at a $1.8B loss. Normally this would not be a big deal for a bank with $200B in assets but it caused a hysterical bank run driven by Silicon Valley VCs panicking and having their portfolio companies get their cash out.
In 2 days $42 billion in deposits got withdrawn. SBV couldn’t survive it and by Friday lunch it was all over, and SBV went into liquidation.
Why it affects USDC
Circle, the company behind USDC, announced USDC had $3.3B of its assets on deposit with SBV. FUD went into overdrive and with it USDC selling due to this exposure, and it de-pegged from its normal $1 value.
Does it mean USDC has lost $3.3B. No.
It Is highly unlikely. It appears SBV by Friday had a $985M shortfall out of $160B in assets. It’s not FTX. The issue is it’s the weekend, the banks are closed and no-one knows, so USDC is taking a FUD beating given the uncertainty and risk.
Why DAI as well?
DAI holds a portion of its assets in USDC, so its value is affected by the same dynamics.
A good mate of mine, who drops into this channel from time to time, was a senior exec with SBV and in California last week. He's flying home to London now. It seems he’s looking for a new job.
351 views10:59
M
