Stablecoin USDC sees redemptions even as crypto market rebounds
CRYPTO market participants redeemed nearly US$1.74 billion of the stablecoin USD Coin on Monday (Mar 13), according to data compiled by researcher Nansen.
That represents more than 2 per cent of USDC’s circulating supply, Nansen said. The outflows come after the stablecoin lost its 1-to-1 peg with the dollar last week when its issuer, Circle Internet Financial, said it held US$3.3 billion — or 8 per cent of reserves supposed to back USDC — at Silicon Valley Bank, which collapsed following a bank run.
Exchanges Binance and Coinbase Global had temporarily halted certain conversions of the stablecoin, which is used to facilitate trading and as a haven from price swings. USDC, which is supposed to be worth around US$1, fell to as little as 85 cents over the weekend.
Circle officials didn’t immediately respond to requests for comment on redemptions.
Assurances from Circle’s chief executive Jeremy Allaire and a government plan to return money to all of the bank’s depositors helped restore the peg on Sunday. Still, many traders have decided to cash out at the first opportunity even with most cryptocurrencies rallying on Monday.
“We have not seen this kind of drawdown in the stablecoin supply since the regulatory crackdown on BUSD last month,” said Andrew Thurman, head of content at Nansen. In February, BUSD issuer Paxos Trust stopped minting the stablecoin after actions by regulators.
Holdings of USDC by institutional or professional traders are at several-month lows, according to Nansen — a sign that those investors are either redeeming on staying on the sidelines.
“Institutional investors are still holding a huge amount of USDC, but it seems that those who got rid of it are hesitant to get back in,” Thurman said. BLOOMBERG
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