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USDC is managed the Centre consortium, which was founded by Circle and includes Coinbase as a member. Circle held around $3.3 billion in Silicon Valley Bank, l
by kersplody 4y ago
USDC is managed the Centre consortium, which was founded by Circle and includes Coinbase as a member.
Circle held around $3.3 billion in Silicon Valley Bank, leading to a run on USDC which resulted in it trading for as little as $0.95 on some exchanges today (Mar 10, 2023). This represents around 30% of USDC's cash reserves and 7% of its total reserves. The balance of reserves are held in T-Bills, which are liquid and typically can only be traded during market hours. Coinbase itself has around $2B of USDC on hand. Circle's rumored exposure to Silvergate's collapse is also a concern.
If more than $7.8B of USDC were to be liquidated over the weekend, USDC would be effectively insolvent. Freezing trades until the market reopens limits this. USDC should rapidly stabilize due to being backed by very liquid hard assets, but it will probably lose significant marketshare to Tether.
UPDATE: USDC Liquidity pools on other exchanges are becoming completely drained, pulling down the peg.
https://www.reddit.com/r/CryptoCurrency/comments/11oaz39/coinbase_just_suspended_selling_usd_coin_massive https://www.reddit.com/r/CryptoCurrency/comments/11oaz39/coi...
- mtlmtlmtlmtl 4y agoCan't help but revel in the fact that these crypto ponzi schemes are so dependent on the very banks all the cryptobros denounce, as evil holdovers from the past that will be obsoleted by their scam tokens (that no one outside their bubble even knows how to use). It's so ridiculous I just have to kind of admire it. It's like a cathedral of human hypocrisy.
- basch 4y agoHow is a stable coin a Ponzi scheme?
- mtlmtlmtlmtl 4y agoHow is a stablecoin stable? They're stable until you get rugpulled.
- swalsh 4y agoThat was an Algorithmic Stablecoin. USDC is not, it was backed by dollars in banks with a 1:1 backing and 3rd party audited.
- EVa5I7bHFq9mnYK 4y ago"was backed" hehe
- mtlmtlmtlmtl 4y agoMany the mortgage bonds in the 2008 crisis were AAA or AA rated by a "third party". And they were dogshit. Is it audited by the SEC or some "auditing firm"?
- basch 4y agoI’ll repeat. How is a stable coin a Ponzi scheme. A Ponzi scheme pays a dividend or share of fake “revenue.” Stablecoins don’t make money, unless lent out.
- Analemma_ 4y agoHow'd that work out for it.
- dd36 4y agoWhen its assets don’t exist.
- Hizonner 4y agoThat's not what a Ponzi scheme is.
- dd36 4y agoThen what is it? A ponzi scheme is inherently an embezzlement.
- tylersmith 4y agoI think there's a shockingly large number of people that think Ponzi scheme just means fraud.
- pcthrowaway 4y agoIs a bank a ponzi scheme if its assets don't exist also? Like if a bank has $10B in customer deposits and one of their armored truck drivers escapes across the border with $2B, then some customers can't be paid back when they try to withdraw, does that make it a ponzi?
- re-thc 4y agoIf you can't be paid at all it's not a Ponzi. The point is to rely on newer funds to pay the older requests.
- selestify 4y agoBanks also rely on “newer funds” (from loan payments) to pay “older requests” (customers withdrawing their deposits). When withdrawals from old requests rise so much that they can’t be covered by new funds, banks collapse.
- basch 4y agoNot just to pay old requests. To pay revenue sharing / dividends / interest to shareholders. A Ponzi scheme is repurposing inflows to appear as revenue to a fake business.
- deleted 4y ago[deleted]
- senttoschool 4y agoPlenty of stable coins have been proven to be ponzi schemes. Terra/Luna anyone?
- deleted 4y ago[deleted]
- loveparade 4y agoOr maybe you just don't understand it? The whole point of USDC is to have exposure to USD and the US banking system, which is supposed to be stable compared to other banking systems around the world. Could that maybe be why it's called USDC? Hmm. If the US banking system starts failing, it absolutely should affect USD stable coins backed by exactly this banking system.
- mtlmtlmtlmtl 4y agoIn what universe is the US banking system more stable than other places in the world? Compared to 3rd world countries?
- _5uxp 4y agoI'd say not majority of the banks or anything like that but top ones like Goldman Sachs (Apple's choice) is more stable than all 3rd world countries and their CB too. Because GS has money printer on their side, literally.
- mtlmtlmtlmtl 4y agoOn the other hand, you could throw a dart at a random non-US WEIRD country and find a more stable banking system..
- beebmam 4y agoWell, I'm pretty sure all credible banks in the US are all insured (both explicitly with FDIC and implicitly far beyond that) by the US government. That's a pretty big thing
- mtlmtlmtlmtl 4y agoThat doesn't make them stable. The 2008 financial crisis was literally caused by big US banks. They then had to be bailed out. This is not a symptom of a stable banking system. It's a symptom of the banks having a disturbing amount of power over the government, which is not a good thing. They were able to conduct what is essentially fraud at a massive scale with impunity because they knew the gov would bail them out when shit hit the fan. I really don't understand what's so "stable" about this.
- pclmulqdq 4y agoA ponzi scheme is just one step along the path to true decentralization.
- mtlmtlmtlmtl 4y agoIt's kind of telling that I truggle to tell whether this is satire. I could totally see a cryptobro unironically making this claim.
- pclmulqdq 4y agoThis was satire but it's how a lot of crypto projects are run.
- WeylandYutani 4y agoCrypto never became a currency. Fundamentally whatever Satoshi preached never materialised.
- EVa5I7bHFq9mnYK 4y agoA lot of people pay for goods with satoshis, so it did materialize, maybe slower than some imagined, but it has nowhere to rush.
- drcode 4y agoCircle used SVB, not Coinbase (I'm no expert though, correct me if I'm wrong) Edit: Parent comment is now correct
- xbruteforce 4y agoThere is USDC liquidity on Coinbase. Which may not be redeemable for USD over the weekend because of this news. That's why Coinbase are stopping withdrawals.
- kersplody 4y agoEdited parent. USD Coin is managed by a consortium called Centre, which was founded by Circle and includes members from the cryptocurrency exchange Coinbase. Circle used SVB.
- xbruteforce 4y agoExactly! The situation should be similar for all other stable coins. DAI has quite a substantial percentage of USDC in their reserves as well. We could witness another death spiral. Let's see how events turn out to be.
- xtracto 4y agoDeploying more capital, steady lads!
- xref 4y agoI know we’re all Extremely Online here, but if you missed this deep cut it’s what Do Kwon said…as Terra was collapsing https://twitter.com/stablekwon/status/1523733542492016640?s=20 https://twitter.com/stablekwon/status/1523733542492016640?s=...
- ashwagary 4y agoLooks like USDC dropped all the way down to $0.85 on some exchanges.
- MrFoof 4y agoUSDC, FRAX, DAI, USDD and USDP all seem to be having a moment. As someone who only observes crypto, the past 4.5 hours (at my time of writing) has been interesting to watch.
- rippercushions 4y agoThere's something deeply ironic about a flight to safety in the form of Tether, which has famously been described as being "quilted out of red flags". But if you can't redeem it and it's not backed by anything remotely approaching normal assets, I guess you can't have a bank run on it either... until the music stops and the insiders propping it up run out of chairs.
- pclmulqdq 4y agoThere's something to be said for everyone knowing the risks of doing business with you, and behaving consistently (consistently badly) so that those risks don't change. That's the regime of Tether. Nobody will even be mad when the rug gets pulled. The federal reserve could stand to learn a thing or two, honestly.
- espadrine 4y agoWhat could the Federal Reserve learn? The structure of risk is similar for both Tether and Circle, AFAICT. While USD risk is heavily distributed across many regulated banks and there are measures in place to mitigate bankruptcy, USDC/T is fairly centralized and the fall of a single bank can put the entire currency at risk, cause sudden and extreme inflation (as is the case now), and potentially stop being accepted by even more merchants. USD risk exists, but seems lower than USDC/T risk, and the same is true for its volatility. All in all, I am not surprised that there are more merchants that accept USD than USDC/T, and the change in methodology that would make the latter competitive would likely require taking a page from the Federal Reserve, not vice-versa.
- pclmulqdq 4y agoPerhaps they could learn that doing consecutive 50-75 bps rate hikes for an entire year will bring with it a lot of adverse effects in a world where they are expected to hike 25 bps at a time? Nobody pricing interest rate risk would have priced what happened last year correctly - it would have been considered a one-in-a-million event, not a routine response to high inflation.
- cperciva 4y agoThe balance of reserves are held in T-Bills, which are liquid and typically can only be traded during market hours. Ok I'll buy that if you or I wanted to sell treasury bills, but... if a company needs to liquidate $10B of treasury bills over the weekend, can't they just call up the CEO of JPMorgan and say "hey we'll give you 10 basis points over Monday's 9AM rate" and make a deal happen?
- kersplody 4y agoThey can try, but no guarantees.
- cperciva 4y agoFair enough. Technically there's no guarantee that the treasury bill market won't lock up on Monday morning either, but I agree that's a more remote possibility.
- vasco 4y agoThey can try, but if JPMorgan CEO is getting such a call it's going to be painful for you and you're going to be in a bad place for negotiating those 10 basis points.
- deleted 4y ago[deleted]
- cornholio 4y agoIt was all fun and games while the crypto bubble was inflating. You basically could do no wrong, any mismanagement would be hidden away by the exponential appreciation of the underlying assets; just hodl until the next bull run and everything would be fine again. When things stabilize and start going down, it's like the morning after the frat-party, bad things come to light. Crypto is fundamentally a negative sum game, it takes enormous resources to run and has generated a large number of self-minted millionaires that have cashed out and lamboed their earnings. There is very little actual marketable utility that crypto provides that could cover these large outlays, perhaps with the exception of facilitating money laundry and illegal transactions. I guess that's a business, but (hopefully) not a multi-trillion business suggested by the bubble's peak. So it's inevitable the game must end with someone holding the bags.
- jleahy 4y agoYou never know who's swimming naked until the tide goes out.
- johnbellone 4y agoYou could say the same thing about SVB and the last 10 years.
- pibechorro 4y agoLol crypto is not what people launder with, its cash and major banks that have been caught over and over again taking dirty deposits. Cartels don't trade in public blockchains. Your ignorance is stunning.
- carlsborg 4y ago> The balance of reserves are held in T-Bills Similar to SVB, from what I understand. SVB parked several billion in treasuries when rates were at ~1.6%, when interest rates went up, that portfolio drew down, they exited with a loss, this triggered a run. So if Circle has 70% of its reserves in T bills, they possibly took a market to market loss too, depending on how they were hedged. (Disclaimer: i have not seen SVB balance sheet, nor Circles.)
- delaaxe 4y agoWasn't SVB in 10 year mortgage-backed securities whereas Circle is in 3 month bills?
- carlsborg 4y agoHmm you're right about the Circle balance sheet. It is/was indeed short dated bills not notes. https://6778953.fs1.hubspotusercontent-na1.net/hubfs/6778953/USDC%20Reserves%20Reports/USDC%20Reserve%20Breakdown_June.pdf https://6778953.fs1.hubspotusercontent-na1.net/hubfs/6778953... Although, still room for losses with those numbers ($50B) https://ycharts.com/indicators/3_month_t_bill https://ycharts.com/indicators/3_month_t_bill, and make them more likely to want to hold to maturity.
- makomk 4y agoNot nearly the same kind of losses, I don't think. The drop in value of bond-like investments is heavily affected not just by the change in interest rates but also the duration: long duration bonds drop much more heavily because the total amount of interest people now expect over their life is much higher. The interest rates on three-month Treasury bills has barely increased over the last few months (which is obviously the longest they could've been holding any for), and then taking into account the duration and the interest they're receiving they shouldn't be looking at mark-to-market losses at all really.
- ptero 4y agoI agree with your conclusion: holding 3-month t-bills virtually isolates you from interest rate risk. But not because rates do not change (they do, a lot: for example 3-month rate jumped by over 0.5% in 2 weeks of Oct 2022). But due to the short duration such change barely affects the remaining interest paid by each bill, which is what determines bill's price.
- SilasX 4y ago> Circle held around $3.3 billion in Silicon Valley Bank, leading to a run on USDC which resulted in it trading for as little as $0.95 on some exchanges today (Mar 10, 2023). It dipped as low as .82 on Gemini. I used the chance to buy some to settle a debt denominated in USDC on Compound, though I haven’t yet paid it back because transaction fees on the ethereum network surged too. DAI fell below .90 even though it’s so overcollateralized that even the 100% loss of SVB funds shouldn’t make it insolvent: https://news.ycombinator.com/item?id=35105876 https://news.ycombinator.com/item?id=35105876 >USDC Liquidity pools on other exchanges are becoming completely drained, pulling down the peg Nit: liquidity pools (at least of the kind described in the link) are decentralized and don’t live on an exchange.