The depreciation of USD Coin stablecoin to $0.87 from its intended $1 peg was attributed to the insolvency of three major banks that were supportive of cryptocurrency – namely Silicon Valley Bank (SVB), Silvergate Bank, and Signature Bank.
Recent developments concerning stablecoins and banks led Binance’s CEO and co-founder, Changpeng Zhao, to announce through a tweet on March 13 that the remaining $1 billion funds in its Industry Recovery Initiative will be converted to “native crypto.”
Bitcoin, BNB, and Ether were among the native cryptocurrencies listed by CZ. He then tweeted links to the hash IDs for the BTC and ETH transactions, stating that $980 million moved in 15 seconds with a transaction charge of $1.98.
In response to the step taken by the co-founder of Binance, Crypto Twitter had different opinions. Some applauded the decision, referring to it as “pure gold,” and proposed using alternative currencies to peg stablecoins:
Some questioned the decision to sell the Binance USD stablecoin BUSD and convert the fund to more “volatile” assets.
Circle, the business behind USDC, reported on March 10 that it held around $3.3 billion at the failed SVB, which prompted the original depegging event. However, by March 13, USDC had returned to its $1 peg, sitting at $0.99 at present.
Circle also maintains secret reserve cash in Silvergate, another crypto-friendly bank based in the United States that collapsed.
The USDC’s volatility had a domino effect on other stablecoins, including Dai, USDD, and FRAX, which also deviated from their $1 peg.
Since the emergence of events began on March 10, the crypto community has been on edge about what will happen next. Claims have been made by Twitter users that there are no longer any banks willing to provide services to companies dealing with crypto.