12 ms·

An Update on USDC and Silicon Valley Bank

217 points by VagueMag 4y ago

optimalsolver 4y ago
>Moreover, SVB has a strong franchise that is at the center of American entrepreneurship and technology industry growth. Tl:Dr: Save us, Big Government.
- deleted 4y ago
  [deleted]
- malermeister 4y ago
  Yeah, it is pretty ironic having this come from all the same people that were oh-so-libertarian when it wasn't affecting them.
- darcys22 4y ago
  They deposited 3B with this bank for the specific purpose of it being a safe place. Their 10B in cash was spread over 6 banks to diversify the bank risk. They have plenty of higher risk investments in their treasury, but these ones were the safe ones intentionally put into banks with insurance. If the government protection wasn't there the investment would’t have been there in the first place
  - benatkin 4y ago
    But the insurance doesn't apply to the full amount.
    - oldgradstudent 4y ago
      The insurance is negligible for them.
      - benatkin 4y ago
        Hence the government protection should be partial. Mostly just making sure SVB's assets are used to lessen the impact of the closure. If that results in Circle getting pennies on the dollar then so be it.
        oldgradstudent 4y ago
        > Mostly just making sure SVB's assets are used to lessen the impact of the closure That's standard practice. Money from liquidation goes first to insured deposits, then what remains goes to uninsured deposits, then to pay other debts, and finally if anything is left, to shareholders. Looks like here it will only cover insured deposits and substantial fraction of uninsured deposits.
        benatkin 4y ago
        Yeah, some think that substantial fraction will be 100%. We'll see! I don't want to give Circle one cent of bailout money, though. And their post is saying that they are owed a full bailout because they participated in the bank run on the day of the bank run, and also begging for a full bailout. Pretty pathetic.
        humanizersequel 4y ago
        >And their post is saying that they are owed a full bailout because they participated in the bank run on the day of the bank run, and also begging for a full bailout. Where in this post does it say that?
        benatkin 4y ago
        The part where they participated in the bank run: > $3.3bn of USDC’s cash reserves remain with SVB. As of Thursday, we had initiated transfers of these funds to other banking partners. Though these transfers had not yet been settled as of close of business Friday, we remain confident in the FDIC’s management of the SVB situation and stand ready to receive these funds. The part where they said that because they participated in the bank run that they should keep it all, presumably even if others who didn't participate in the bank run lose some of theirs: > We have reason to believe that under applicable FDIC policy, transfers initiated prior to a bank entering receivership would have otherwise been processed normally. In other words, the FDIC should allow transactions to settle in the ordinary course through the end of a bank’s standard daily processing cycle until the FDIC takes control of the failed institution. "transfers initiated prior to a bank entering receivership" is doing a lot of work here.
  - JumpCrisscross 4y ago
    > 10B in cash was spread over 6 banks to diversify the bank risk This is nonsense Treasury management. Fidelity spreads checking account deposits across twenty-six banks to reach $3mm FDIC coverage [1]. Beyond sweep, Circle’s assets should be in short-term, on-the-run Treasuries, repos and commercial paper. [1] https://accountopening.fidelity.com/ftgw/aong/aongapp/fdicBankList?type=fcma https://accountopening.fidelity.com/ftgw/aong/aongapp/fdicBa...
    - darcys22 4y ago
      They do hold 32B in short term treasury bills though https://www.blackrock.com/cash/en-us/products/329365/ https://www.blackrock.com/cash/en-us/products/329365/ These funds appear to be specifically for short term redemptions, if they turn over 3B in redemption's every 7 days then how are they meant to keep less then that in the banks
- jfengel 4y ago
  They don't even need a bailout. Ordinary big government regulation is solving this.
- rekttrader 4y ago
  That’s a cheap shot, does roku deserve a 470+m haircut?
  - rekttrader 4y ago
    Also they are 95% solvent as a bank... this too will pass.
  - paulddraper 4y ago
    > deserve IDK what that word means, in a financial context. Can you get paid based on this "deserve"? --- But in reality, no, no one will lose 100%.
  - JumpCrisscross 4y ago
    > does roku deserve a 470+m haircut Yes. Public company CFOs should not have this level of non-AAA counterparty risk concentration. (SVB were A1 and Baa1 [1] / A+ and BBB+ [2].) [1] https://money.usnews.com/investing/news/articles/2023-03-10/moodys-downgrades-credit-ratings-on-silicon-valley-bank-svb-financial https://money.usnews.com/investing/news/articles/2023-03-10/... [2] https://wolfstreet.com/credit-rating-scales-by-moodys-sp-and-fitch/ https://wolfstreet.com/credit-rating-scales-by-moodys-sp-and...
    - VagueMag 4y ago
      I would like to know how I can get the $400K/year corporate treasurer job that's just "park all the money in a single bank account with no insurance."
- throw03172019 4y ago
  Mmmm no. That’s not what is going on here.
bb88 4y ago
After the fall of Terra, it's clear that stablecoins can only go down in value. There's also no FDIC to step in to take over the failing stablecoin. You're trusting USDC and by extension BlackRock to do the right thing here. If it's not a security than it's not regulated.
- bhaak 4y ago
  Terra was no stablecoin and it has been constantly pointed out that it wasn't. USDC is backed 1 USDC for 1 USD. What you're actually seeing here is that the traditional finance system has lead to a crash in crypto. That's almost refreshing. Usually crypto fucks up by itself (see FTX and Terra for the most recent ones).
  - whimsicalism 4y ago
    1 USD worth of treasuries or bank deposits, not a USD directly.
  - bb88 4y ago
    What's their balance sheet at the moment assuming 8% of cash is missing? Is it still 1:1 or 1:.94? Also coindesk says TerraUSD is a stablecoin. https://www.coindesk.com/price/terrausd/ https://www.coindesk.com/price/terrausd/ Washington Post too: https://www.washingtonpost.com/business/what-are-stablecoins-why-did-terrausd-go-so-wobbly/2022/07/06/20f1c9a0-fcfc-11ec-b39d-71309168014b_story.html https://www.washingtonpost.com/business/what-are-stablecoins... Also Gemini says it as well: https://www.gemini.com/en-us/prices/terrausd-ethereum https://www.gemini.com/en-us/prices/terrausd-ethereum
    - bhaak 4y ago
      Their balance sheet is still 1:1 as the 8% at SBV has not yet been written off. The market reacts faster of course but the market has no crystal ball. It can't predict what's going to happen.
  - JumpCrisscross 4y ago
    > USDC is backed 1 USDC for 1 USD It’s at least 87¢ and 23¢ of priority unsecured claims on a bank in receivership.
tekla 4y ago
What they don't bring up. The peg is a lie, hit $0.87. https://www.cnbc.com/2023/03/11/stablecoin-usdc-breaks-dollar-peg-after-firm-reveals-it-has-3point3-billion-in-svb-exposure.html https://www.cnbc.com/2023/03/11/stablecoin-usdc-breaks-dolla...
- bhaak 4y ago
  The peg is held up by the belief that you can always get 1 USD for 1 USDC. Obviously the market had some doubts about this today and then liquidity issues drove the price down. I'm somewhat surprised that it climbed back up this fast which means that the panic seems to be over (for the moment).
  - z3c0 4y ago
    I guess this was one of those "be greedy when everyone is being fearful" moments. An easy ~10% return.
    - pishpash 4y ago
      10% really is not enough to compensate for the uncertainty around Circle's commitment, whatever that is. More like be greedy when you have insider information.
  - ed25519FUUU 4y ago
    For something that’s supposed to be a 1:1 peg, running at 4% below dollar value is significant.
  - mdasen 4y ago
    That means it's not really a peg. If you have a peg, it means that the currency issuer is willing to buy their currency for a set amount. Right now, Circle isn't willing to buy USDC for $1 USD - therefore, there is no peg. Or maybe what we're talking about is a broken peg. Circle was willing to pay $1 USD for a USDC, but they're no longer willing to pay that (at least temporarily). Maybe countries have seen their pegs broken because they couldn't actually defend their peg. They'd promise "we'll give you $1 USD for every 2 PegCurrency" and then someone would come along with a ton of PegCurrency and ask for dollars and they wouldn't have enough dollars to give them. A peg only lasts as long as you have the currency to keep paying at that rate. We'll have to see on Monday and Tuesday whether they will go back to defending their peg. Unlike many foreign currency pegs, they should have the cash to defend their peg to the last dollar (with the exception of losses incurred due to SVB going under). However, it still might mean a huge loss of confidence in USDC. If they're unable to offer liquidity when people want it, that's potentially a big problem for the product they're offering (but it also might not be: maybe people don't care about 24/7 liquidity and are ok with waiting several days for liquidity).
obblekk 4y ago
23% of the reserve, or $9.7B is held in cash. I think on Thursday, SVB saw cash outflow requests over $40b in one day. USDC peg is so far below 1 right now there will definitely be a lot of par arbitrage Monday trying to withdraw. Hopefully it doesn’t take longer than a day for them to settle treasury trades, and maybe some people have lost the keys to their crypto. They could also possibly have a line of credit with instant settlement assuming they’re truly solvent with marketable securities at market prices.
- bb88 4y ago
  Can one short USDC with leverage?
  - 0x53 4y ago
    Not easily that I know of, the best way would be to use a defi application like compound.finance. You can deposit usdc and take a loan against it in another currency. Then you repay the loan later. However, that is just a normal short. The only real way to lever this is to keep depositing the loan money, and taking out more loans which is expensive in terms of fees.
    - rabf 4y ago
      You can trade it with leverage here: https://www.bybit.com/trade/usdt/USDCUSDT https://www.bybit.com/trade/usdt/USDCUSDT
  - WalterSear 4y ago
    Short? I can't see this not returning to it's peg by the next news cycle. It's free money. SVB went bankrupt - as a business: it can't pay its bills. People are reacting to this as if the deposits have vanished entirely. If you think USDC is a shorting opportunity, short anything crypto. USDC is literally the second largest domino.
    - dfadsadsf 4y ago
      There is good chance that ~30% of deposits above 250k vanished. SVB really screwed up on trades. With equity at zero or close to zero, there is no backstop. Net present value of 2% securities that SVB loaded on is way below par.
Lionga 4y ago
Steady Lads
- Yizahi 4y ago
  WHAT
sbardle 4y ago
Hey NoCoiners, can you give us some coin?
danaos 4y ago
I have always kept away from circle after they were caught manipulating reviews. https://www.reddit.com/r/Bitcoin/comments/5ms1zc/after_being_bombarded_with_1_star_reviews_circle/ https://www.reddit.com/r/Bitcoin/comments/5ms1zc/after_being...
- capableweb 4y ago
  I'm pretty sure that's against Apple's App Store T&C and the application would be banned by flooding fake 5 star reviews. It would also be pretty easy to detect. Was the app ever banned or everything proceeded as normal? Is Apple in Circle's pocket somehow?
  - yunohn 4y ago
    It’s been demonstrated innumerable times that the App Store is not actually well maintained. Eg - https://twitter.com/TechEmails/status/1631352764247977985?s=20 https://twitter.com/TechEmails/status/1631352764247977985?s=...
  - jeroenhd 4y ago
    Apple is known to loosen its rules around big apps. Facebook and other big players have gotten away with many privacy violations that any small app would be blacklisted for, simply because Apple knows banning them would damage their brand more than making special rules for big players does. If Apple were to ban Coinbase, many people would probably blame Apple for restricting access to their cryptocurrency rather than thank them for standing up for fair app store reviews. Instead, they've probably just asked them nicely to stop doing whatever would be ban-worthy otherwise, with a ban (and a press statement) ready in case they don't cooperate. It wouldn't make business sense to ban a popular app for something as silly as fake reviews, especially with the amount of customer money involved.
- everfree 4y ago
  There are lots of financial incentives for people to review bomb the app in both directions. Is there any evidence that it wasn't third parties manipulating the reviews both times in both directions? I'm imagining a second thread on a different forum, nearly identical to the thread you linked and just as ideological, with a title like "After Circle was unfairly review-bombed with 1 Star reviews by haters, our community has added 55+ Five Star reviews in 3 days."
yieldcrv 4y ago
Anybody arbing this with their MEV bots? A couple MEV trackers on twitter are showing people making a shit ton of money through various onchain protocols goofing. (this has nothing to do with the USDC redemption mechanism, nobody is doing that while banks are closed and Coinbase is disabled)
O__________O 4y ago
Anyone have any idea based on trading price and volume roughly how much was lost below 1:1 peg in past 24-hours?
braingenious 4y ago
I’m not very knowledgeable on this topic, so I have a legit question about all of this: How is pausing withdrawals not blatant currency manipulation? If I had USDC and lost all faith in it yesterday, shouldn’t I be allowed to cash out today? Also, if they’ve got many billions in cash, why would losing access to a sliver of it justify shutting down withdrawals? “Trust us, it’s worth a dollar! Or don’t trust us! It doesn’t matter because you don’t have any choice but to hold USDC until we deem it advantageous to us to allow you to exchange them for real money!”
- capableweb 4y ago
  Imagine that you use a currency made by a specific company, lets say it's called PaypalCoin. Part of the value of the currency is that the company manages it, part of the risk is that a company manages it. So you'll only be able to exchange it for X as long as Paypal say you can exchange it for X. This is part of what PaypalCoin is, so if you use it, you should be aware of this. This is basically what USDC is, and Circle is the organization that controls it. It is not a decentralized currency, it's a centralized digital currency. If Circle blacklists you and your funds, you won't be able to trade it for USD in the traditional exchanges, you'd only be able to do it P2P. This has happened already, with Tornado Cash, so it has precedent, not something I'm making up. > USDC is issued and redeemed in accordance with Centre policies including the Centre Blacklisting Policy. Centre reserves the right to block the transfer of USDC to and from an address on chain as permitted under the Centre Blacklisting Policy. https://www.circle.com/en/legal/usdc-terms https://www.circle.com/en/legal/usdc-terms & https://www.centre.io/hubfs/PDF/Centre_Blacklisting_Policy_20200512.pdf https://www.centre.io/hubfs/PDF/Centre_Blacklisting_Policy_2... If Circle says you cannot exchange your USDC for USD, then that's the rule. If you don't want that possibility, you wouldn't use USDC in the first place.
  - easrng 4y ago
    If Circle blacklists you and your funds you can't do anything with them at all afaik.
    - 4y ago
JohnTHaller 4y ago
For context: Stablecoin USDC depegged last night, hitting as low as $0.879. It's currently at $0.959.
paulpauper 4y ago
In such a case, Circle, as required by law under stored-value money transmission regulation, will stand behind USDC and cover any shortfall using corporate resources, involving external capital if necessary. I don't get it..the money is gone. Is there something I am missing here? You cannot just magically fix a shortfall.
- rvnx 4y ago
  It can, because they are investing the funds on t-bills or similar instruments with a 5% yield, and they don't pay any interest to the USDC holders.
deleted 4y ago
[deleted]
sql-spy 4y ago
[flagged]
- jdross 4y ago
  This is FUD spreading — they filed an 8-k on friday dispelling concerns here and emphasizing their diversification of fund sources and liquidity. it’s smart to limit exposure to insurance caps, but that doesn’t mean there is going to be a contagion de facto
  - yieldcrv 4y ago
    Something that custodies money should be able to give it all back instantly. If it is vulnerable to "fear uncertainy and doubt" as a self fulfilling prophecy of not being able to pay out everything instantly, then it should be dismantled. I think its interesting that properly collateralized and well managed services don't make the news, but it is very common in the crypto space for 100% withdrawals to occur seamlessly. Far more common than the implosions. Whereas seemingly all banks are relying on withdrawals en masse simply not happening.
yunohn 4y ago
> redemption is constrained by the working hours of the U.S. banking system Why do they keep saying this? This should’ve always been the case, regardless of SVB’s collapse. Seems more like a non sequitur to cover for an actual issue.
- wmf 4y ago
  Some people are saying "gotcha! you can't redeem" as if that's a real problem and Circle is clarifying that you could never redeem on the weekend.
  - lxgr 4y ago
    But something must be different this weekend compared to all the ones before, at least at Coinbase: https://news.ycombinator.com/item?id=35105039 https://news.ycombinator.com/item?id=35105039
    - wmf 4y ago
      There's a bank run on USDC right now which is probably exceeding Coinbase's cash on hand or risk tolerance.
- everfree 4y ago
  Typically, Coinbase has been able to absorb liquidity on weekends to give consumers the illusion that USDC is redeemable outside of banking hours, but the SVB crash caused their weekend reserves to run out. If SVB didn't crash, there wouldn't have been a huge spike in USDC redemptions, and Coinbase would have been able to service redemptions using their weekend reserves like they always have.
diebeforei485 4y ago
It's ironic that a fiat bank is causing crypto to lose value.
- SparkyMcUnicorn 4y ago
  Decentralized crypto actually went up while the centralized went down.
dzink 4y ago
Circle moved assets out of somewhere and into BNY Mellon last week. Where is that somewhere (Was it SVB, since 3.3Bn “remain” in SVB?). When did they move money out of SVB and how much? Did Circle and USDC trigger the sudden liquidity gap in SVP that triggered the fire sale of 21B at a loss? Is the crypto panic triggering the bank runs? “Last week, we took action to reduce bank risk and deposited $5.4bn with BNY Mellon, one of the largest and most stable financial institutions in the world, known for the strength of their balance sheet and as a custodian. $3.3bn of USDC’s cash reserves remain with SVB. As of Thursday, we had initiated transfers of these funds to other banking partners. ”
- pishpash 4y ago
  Crypto first, tech second, then crypto/tech intermediaries, then exposed regional banks, then funds and general banks, etc. etc.
- oarabbus_ 4y ago
  >Did Circle and USDC trigger the sudden liquidity gap in SVP that triggered the fire sale of 21B at a loss? It seems unlikely that would be the case, 5.4B would represent only 2.5% of their AUM at the time of failure. However the Fed did reduce the bank cash reserve requirement to 0% in March 2020, so it's technically in the realm of possibility... but having to sell off assets after a 2.5% drawdown is analogous to being 40x leveraged. It would be unbelievably poor risk management if this were the case, and seems more likely a much larger event than a few crypto companies (which are small in the grand scheme of things) withdrawing deposits.
- jacobsimon 4y ago
  Had the same thought, but why would they choose to reduce bank risk unless they already knew about the liquidity gap?
  - extheat 4y ago
    I believe their last earnings call was what precipitated the fear in the bank and ultimately what caused the big spike in withdrawals that led to them running out of immediately free cash.
xivzgrev 4y ago
In my understanding all accounts up to insured limit will get paid Monday. everything else is going to have to file a claim which could take a long time to resolve. Seems like about 8% their assets will be locked up / at risk. For a company that promises to have 100% of assets backed up / readily accessible, I wouldn’t be surprised if this triggers a run.
mrcggl 4y ago
Still trading at 6% discount, on top of which you can lever up to 5x on-chain (so no counterparty risk). Seems excessive considering what we know.
- guipsp 4y ago
  "no counterparty risk" is not completely accurate
MrPatan 4y ago
Oooh, I see it now, bailouts to banks will be handed out based on ESG scores! GG

217 points by VagueMag 4y ago

>Moreover, SVB has a strong franchise that is at the center of American entrepreneurship and technology industry growth. Tl:Dr: Save us, Big Government.

deleted 4y ago
[deleted]
malermeister 4y ago
Yeah, it is pretty ironic having this come from all the same people that were oh-so-libertarian when it wasn't affecting them.
darcys22 4y ago
They deposited 3B with this bank for the specific purpose of it being a safe place. Their 10B in cash was spread over 6 banks to diversify the bank risk. They have plenty of higher risk investments in their treasury, but these ones were the safe ones intentionally put into banks with insurance. If the government protection wasn't there the investment would’t have been there in the first place
- benatkin 4y ago
  But the insurance doesn't apply to the full amount.
  - oldgradstudent 4y ago
    The insurance is negligible for them.
    - benatkin 4y ago
      Hence the government protection should be partial. Mostly just making sure SVB's assets are used to lessen the impact of the closure. If that results in Circle getting pennies on the dollar then so be it.
      - oldgradstudent 4y ago
        > Mostly just making sure SVB's assets are used to lessen the impact of the closure That's standard practice. Money from liquidation goes first to insured deposits, then what remains goes to uninsured deposits, then to pay other debts, and finally if anything is left, to shareholders. Looks like here it will only cover insured deposits and substantial fraction of uninsured deposits.
        benatkin 4y ago
        Yeah, some think that substantial fraction will be 100%. We'll see! I don't want to give Circle one cent of bailout money, though. And their post is saying that they are owed a full bailout because they participated in the bank run on the day of the bank run, and also begging for a full bailout. Pretty pathetic.
        humanizersequel 4y ago
        >And their post is saying that they are owed a full bailout because they participated in the bank run on the day of the bank run, and also begging for a full bailout. Where in this post does it say that?
        benatkin 4y ago
        The part where they participated in the bank run: > $3.3bn of USDC’s cash reserves remain with SVB. As of Thursday, we had initiated transfers of these funds to other banking partners. Though these transfers had not yet been settled as of close of business Friday, we remain confident in the FDIC’s management of the SVB situation and stand ready to receive these funds. The part where they said that because they participated in the bank run that they should keep it all, presumably even if others who didn't participate in the bank run lose some of theirs: > We have reason to believe that under applicable FDIC policy, transfers initiated prior to a bank entering receivership would have otherwise been processed normally. In other words, the FDIC should allow transactions to settle in the ordinary course through the end of a bank’s standard daily processing cycle until the FDIC takes control of the failed institution. "transfers initiated prior to a bank entering receivership" is doing a lot of work here.
- JumpCrisscross 4y ago
  > 10B in cash was spread over 6 banks to diversify the bank risk This is nonsense Treasury management. Fidelity spreads checking account deposits across twenty-six banks to reach $3mm FDIC coverage [1]. Beyond sweep, Circle’s assets should be in short-term, on-the-run Treasuries, repos and commercial paper. [1] https://accountopening.fidelity.com/ftgw/aong/aongapp/fdicBankList?type=fcma https://accountopening.fidelity.com/ftgw/aong/aongapp/fdicBa...
  - darcys22 4y ago
    They do hold 32B in short term treasury bills though https://www.blackrock.com/cash/en-us/products/329365/ https://www.blackrock.com/cash/en-us/products/329365/ These funds appear to be specifically for short term redemptions, if they turn over 3B in redemption's every 7 days then how are they meant to keep less then that in the banks
jfengel 4y ago
They don't even need a bailout. Ordinary big government regulation is solving this.
rekttrader 4y ago
That’s a cheap shot, does roku deserve a 470+m haircut?
- rekttrader 4y ago
  Also they are 95% solvent as a bank... this too will pass.
- paulddraper 4y ago
  > deserve IDK what that word means, in a financial context. Can you get paid based on this "deserve"? --- But in reality, no, no one will lose 100%.
- JumpCrisscross 4y ago
  > does roku deserve a 470+m haircut Yes. Public company CFOs should not have this level of non-AAA counterparty risk concentration. (SVB were A1 and Baa1 [1] / A+ and BBB+ [2].) [1] https://money.usnews.com/investing/news/articles/2023-03-10/moodys-downgrades-credit-ratings-on-silicon-valley-bank-svb-financial https://money.usnews.com/investing/news/articles/2023-03-10/... [2] https://wolfstreet.com/credit-rating-scales-by-moodys-sp-and-fitch/ https://wolfstreet.com/credit-rating-scales-by-moodys-sp-and...
  - VagueMag 4y ago
    I would like to know how I can get the $400K/year corporate treasurer job that's just "park all the money in a single bank account with no insurance."
throw03172019 4y ago
Mmmm no. That’s not what is going on here.

bb88 4y ago

After the fall of Terra, it's clear that stablecoins can only go down in value. There's also no FDIC to step in to take over the failing stablecoin. You're trusting USDC and by extension BlackRock to do the right thing here. If it's not a security than it's not regulated.

bhaak 4y ago
Terra was no stablecoin and it has been constantly pointed out that it wasn't. USDC is backed 1 USDC for 1 USD. What you're actually seeing here is that the traditional finance system has lead to a crash in crypto. That's almost refreshing. Usually crypto fucks up by itself (see FTX and Terra for the most recent ones).
- whimsicalism 4y ago
  1 USD worth of treasuries or bank deposits, not a USD directly.
- bb88 4y ago
  What's their balance sheet at the moment assuming 8% of cash is missing? Is it still 1:1 or 1:.94? Also coindesk says TerraUSD is a stablecoin. https://www.coindesk.com/price/terrausd/ https://www.coindesk.com/price/terrausd/ Washington Post too: https://www.washingtonpost.com/business/what-are-stablecoins-why-did-terrausd-go-so-wobbly/2022/07/06/20f1c9a0-fcfc-11ec-b39d-71309168014b_story.html https://www.washingtonpost.com/business/what-are-stablecoins... Also Gemini says it as well: https://www.gemini.com/en-us/prices/terrausd-ethereum https://www.gemini.com/en-us/prices/terrausd-ethereum
  - bhaak 4y ago
    Their balance sheet is still 1:1 as the 8% at SBV has not yet been written off. The market reacts faster of course but the market has no crystal ball. It can't predict what's going to happen.
- JumpCrisscross 4y ago
  > USDC is backed 1 USDC for 1 USD It’s at least 87¢ and 23¢ of priority unsecured claims on a bank in receivership.

tekla 4y ago

What they don't bring up. The peg is a lie, hit $0.87. https://www.cnbc.com/2023/03/11/stablecoin-usdc-breaks-dollar-peg-after-firm-reveals-it-has-3point3-billion-in-svb-exposure.html https://www.cnbc.com/2023/03/11/stablecoin-usdc-breaks-dolla...

bhaak 4y ago
The peg is held up by the belief that you can always get 1 USD for 1 USDC. Obviously the market had some doubts about this today and then liquidity issues drove the price down. I'm somewhat surprised that it climbed back up this fast which means that the panic seems to be over (for the moment).
- z3c0 4y ago
  I guess this was one of those "be greedy when everyone is being fearful" moments. An easy ~10% return.
  - pishpash 4y ago
    10% really is not enough to compensate for the uncertainty around Circle's commitment, whatever that is. More like be greedy when you have insider information.
- ed25519FUUU 4y ago
  For something that’s supposed to be a 1:1 peg, running at 4% below dollar value is significant.
- mdasen 4y ago
  That means it's not really a peg. If you have a peg, it means that the currency issuer is willing to buy their currency for a set amount. Right now, Circle isn't willing to buy USDC for $1 USD - therefore, there is no peg. Or maybe what we're talking about is a broken peg. Circle was willing to pay $1 USD for a USDC, but they're no longer willing to pay that (at least temporarily). Maybe countries have seen their pegs broken because they couldn't actually defend their peg. They'd promise "we'll give you $1 USD for every 2 PegCurrency" and then someone would come along with a ton of PegCurrency and ask for dollars and they wouldn't have enough dollars to give them. A peg only lasts as long as you have the currency to keep paying at that rate. We'll have to see on Monday and Tuesday whether they will go back to defending their peg. Unlike many foreign currency pegs, they should have the cash to defend their peg to the last dollar (with the exception of losses incurred due to SVB going under). However, it still might mean a huge loss of confidence in USDC. If they're unable to offer liquidity when people want it, that's potentially a big problem for the product they're offering (but it also might not be: maybe people don't care about 24/7 liquidity and are ok with waiting several days for liquidity).

obblekk 4y ago

23% of the reserve, or $9.7B is held in cash. I think on Thursday, SVB saw cash outflow requests over $40b in one day. USDC peg is so far below 1 right now there will definitely be a lot of par arbitrage Monday trying to withdraw. Hopefully it doesn’t take longer than a day for them to settle treasury trades, and maybe some people have lost the keys to their crypto. They could also possibly have a line of credit with instant settlement assuming they’re truly solvent with marketable securities at market prices.

bb88 4y ago
Can one short USDC with leverage?
- 0x53 4y ago
  Not easily that I know of, the best way would be to use a defi application like compound.finance. You can deposit usdc and take a loan against it in another currency. Then you repay the loan later. However, that is just a normal short. The only real way to lever this is to keep depositing the loan money, and taking out more loans which is expensive in terms of fees.
  - rabf 4y ago
    You can trade it with leverage here: https://www.bybit.com/trade/usdt/USDCUSDT https://www.bybit.com/trade/usdt/USDCUSDT
- WalterSear 4y ago
  Short? I can't see this not returning to it's peg by the next news cycle. It's free money. SVB went bankrupt - as a business: it can't pay its bills. People are reacting to this as if the deposits have vanished entirely. If you think USDC is a shorting opportunity, short anything crypto. USDC is literally the second largest domino.
  - dfadsadsf 4y ago
    There is good chance that ~30% of deposits above 250k vanished. SVB really screwed up on trades. With equity at zero or close to zero, there is no backstop. Net present value of 2% securities that SVB loaded on is way below par.

Lionga 4y ago

Steady Lads

Yizahi 4y ago
WHAT

sbardle 4y ago

Hey NoCoiners, can you give us some coin?

danaos 4y ago

I have always kept away from circle after they were caught manipulating reviews. https://www.reddit.com/r/Bitcoin/comments/5ms1zc/after_being_bombarded_with_1_star_reviews_circle/ https://www.reddit.com/r/Bitcoin/comments/5ms1zc/after_being...

capableweb 4y ago
I'm pretty sure that's against Apple's App Store T&C and the application would be banned by flooding fake 5 star reviews. It would also be pretty easy to detect. Was the app ever banned or everything proceeded as normal? Is Apple in Circle's pocket somehow?
- yunohn 4y ago
  It’s been demonstrated innumerable times that the App Store is not actually well maintained. Eg - https://twitter.com/TechEmails/status/1631352764247977985?s=20 https://twitter.com/TechEmails/status/1631352764247977985?s=...
- jeroenhd 4y ago
  Apple is known to loosen its rules around big apps. Facebook and other big players have gotten away with many privacy violations that any small app would be blacklisted for, simply because Apple knows banning them would damage their brand more than making special rules for big players does. If Apple were to ban Coinbase, many people would probably blame Apple for restricting access to their cryptocurrency rather than thank them for standing up for fair app store reviews. Instead, they've probably just asked them nicely to stop doing whatever would be ban-worthy otherwise, with a ban (and a press statement) ready in case they don't cooperate. It wouldn't make business sense to ban a popular app for something as silly as fake reviews, especially with the amount of customer money involved.
everfree 4y ago
There are lots of financial incentives for people to review bomb the app in both directions. Is there any evidence that it wasn't third parties manipulating the reviews both times in both directions? I'm imagining a second thread on a different forum, nearly identical to the thread you linked and just as ideological, with a title like "After Circle was unfairly review-bombed with 1 Star reviews by haters, our community has added 55+ Five Star reviews in 3 days."

yieldcrv 4y ago

Anybody arbing this with their MEV bots? A couple MEV trackers on twitter are showing people making a shit ton of money through various onchain protocols goofing. (this has nothing to do with the USDC redemption mechanism, nobody is doing that while banks are closed and Coinbase is disabled)

O__________O 4y ago

Anyone have any idea based on trading price and volume roughly how much was lost below 1:1 peg in past 24-hours?

braingenious 4y ago

I’m not very knowledgeable on this topic, so I have a legit question about all of this: How is pausing withdrawals not blatant currency manipulation? If I had USDC and lost all faith in it yesterday, shouldn’t I be allowed to cash out today? Also, if they’ve got many billions in cash, why would losing access to a sliver of it justify shutting down withdrawals? “Trust us, it’s worth a dollar! Or don’t trust us! It doesn’t matter because you don’t have any choice but to hold USDC until we deem it advantageous to us to allow you to exchange them for real money!”

capableweb 4y ago
Imagine that you use a currency made by a specific company, lets say it's called PaypalCoin. Part of the value of the currency is that the company manages it, part of the risk is that a company manages it. So you'll only be able to exchange it for X as long as Paypal say you can exchange it for X. This is part of what PaypalCoin is, so if you use it, you should be aware of this. This is basically what USDC is, and Circle is the organization that controls it. It is not a decentralized currency, it's a centralized digital currency. If Circle blacklists you and your funds, you won't be able to trade it for USD in the traditional exchanges, you'd only be able to do it P2P. This has happened already, with Tornado Cash, so it has precedent, not something I'm making up. > USDC is issued and redeemed in accordance with Centre policies including the Centre Blacklisting Policy. Centre reserves the right to block the transfer of USDC to and from an address on chain as permitted under the Centre Blacklisting Policy. https://www.circle.com/en/legal/usdc-terms https://www.circle.com/en/legal/usdc-terms & https://www.centre.io/hubfs/PDF/Centre_Blacklisting_Policy_20200512.pdf https://www.centre.io/hubfs/PDF/Centre_Blacklisting_Policy_2... If Circle says you cannot exchange your USDC for USD, then that's the rule. If you don't want that possibility, you wouldn't use USDC in the first place.
- easrng 4y ago
  If Circle blacklists you and your funds you can't do anything with them at all afaik.
  - 4y ago

JohnTHaller 4y ago

For context: Stablecoin USDC depegged last night, hitting as low as $0.879. It's currently at $0.959.

paulpauper 4y ago

In such a case, Circle, as required by law under stored-value money transmission regulation, will stand behind USDC and cover any shortfall using corporate resources, involving external capital if necessary. I don't get it..the money is gone. Is there something I am missing here? You cannot just magically fix a shortfall.

rvnx 4y ago
It can, because they are investing the funds on t-bills or similar instruments with a 5% yield, and they don't pay any interest to the USDC holders.

deleted 4y ago

[deleted]

sql-spy 4y ago

[flagged]

jdross 4y ago
This is FUD spreading — they filed an 8-k on friday dispelling concerns here and emphasizing their diversification of fund sources and liquidity. it’s smart to limit exposure to insurance caps, but that doesn’t mean there is going to be a contagion de facto
- yieldcrv 4y ago
  Something that custodies money should be able to give it all back instantly. If it is vulnerable to "fear uncertainy and doubt" as a self fulfilling prophecy of not being able to pay out everything instantly, then it should be dismantled. I think its interesting that properly collateralized and well managed services don't make the news, but it is very common in the crypto space for 100% withdrawals to occur seamlessly. Far more common than the implosions. Whereas seemingly all banks are relying on withdrawals en masse simply not happening.

yunohn 4y ago

> redemption is constrained by the working hours of the U.S. banking system Why do they keep saying this? This should’ve always been the case, regardless of SVB’s collapse. Seems more like a non sequitur to cover for an actual issue.

wmf 4y ago
Some people are saying "gotcha! you can't redeem" as if that's a real problem and Circle is clarifying that you could never redeem on the weekend.
- lxgr 4y ago
  But something must be different this weekend compared to all the ones before, at least at Coinbase: https://news.ycombinator.com/item?id=35105039 https://news.ycombinator.com/item?id=35105039
  - wmf 4y ago
    There's a bank run on USDC right now which is probably exceeding Coinbase's cash on hand or risk tolerance.
everfree 4y ago
Typically, Coinbase has been able to absorb liquidity on weekends to give consumers the illusion that USDC is redeemable outside of banking hours, but the SVB crash caused their weekend reserves to run out. If SVB didn't crash, there wouldn't have been a huge spike in USDC redemptions, and Coinbase would have been able to service redemptions using their weekend reserves like they always have.

diebeforei485 4y ago

It's ironic that a fiat bank is causing crypto to lose value.

SparkyMcUnicorn 4y ago
Decentralized crypto actually went up while the centralized went down.

dzink 4y ago

Circle moved assets out of somewhere and into BNY Mellon last week. Where is that somewhere (Was it SVB, since 3.3Bn “remain” in SVB?). When did they move money out of SVB and how much? Did Circle and USDC trigger the sudden liquidity gap in SVP that triggered the fire sale of 21B at a loss? Is the crypto panic triggering the bank runs? “Last week, we took action to reduce bank risk and deposited $5.4bn with BNY Mellon, one of the largest and most stable financial institutions in the world, known for the strength of their balance sheet and as a custodian. $3.3bn of USDC’s cash reserves remain with SVB. As of Thursday, we had initiated transfers of these funds to other banking partners. ”

pishpash 4y ago
Crypto first, tech second, then crypto/tech intermediaries, then exposed regional banks, then funds and general banks, etc. etc.
oarabbus_ 4y ago
>Did Circle and USDC trigger the sudden liquidity gap in SVP that triggered the fire sale of 21B at a loss? It seems unlikely that would be the case, 5.4B would represent only 2.5% of their AUM at the time of failure. However the Fed did reduce the bank cash reserve requirement to 0% in March 2020, so it's technically in the realm of possibility... but having to sell off assets after a 2.5% drawdown is analogous to being 40x leveraged. It would be unbelievably poor risk management if this were the case, and seems more likely a much larger event than a few crypto companies (which are small in the grand scheme of things) withdrawing deposits.
jacobsimon 4y ago
Had the same thought, but why would they choose to reduce bank risk unless they already knew about the liquidity gap?
- extheat 4y ago
  I believe their last earnings call was what precipitated the fear in the bank and ultimately what caused the big spike in withdrawals that led to them running out of immediately free cash.

xivzgrev 4y ago

In my understanding all accounts up to insured limit will get paid Monday. everything else is going to have to file a claim which could take a long time to resolve. Seems like about 8% their assets will be locked up / at risk. For a company that promises to have 100% of assets backed up / readily accessible, I wouldn’t be surprised if this triggers a run.

mrcggl 4y ago

Still trading at 6% discount, on top of which you can lever up to 5x on-chain (so no counterparty risk). Seems excessive considering what we know.

guipsp 4y ago
"no counterparty risk" is not completely accurate

MrPatan 4y ago

Oooh, I see it now, bailouts to banks will be handed out based on ESG scores! GG