Nine of the top 10 stablecoins by market cap are trading below their dollar peg as the market reels from the contagion sparked by the depeg of Circle’s USDC stablecoin on March 11, according to CryptoSlate data.
USDC lost its peg after Circle announced that roughly $3.3 billion of its cash reserves were held at collapsed Silicon Valley Bank — sparking unprecedented redemptions as investors traumatized by multiple meltdowns in 2022 began exchanging USDC for other stablecoins and cryptocurrencies.
Stablecoins struggling with stability
As of press time, almost all of the big stablecoins are struggling with maintaining their peg — including Binance’s BUSD, which is trading just below the peg at $0.9988.
The biggest loser is USDC, which has lost almost 10% of its value and is currently trading at $0.917. Circle has tried to assuage fears around a total collapse and said it remains resilient despite its exposure to struggling banks. It has continued to honor 1:1 redemptions so far.
Some traders and analysts surmise that the stablecoin is trading below its actual value even if there was a 0% chance of recovering its deposit. However, the majority sentiment points to a swift resolution of the matter within weeks based on previous cases of FDIC coverage and the nature of Circle’s deposits — with the selloff attributed to panic and trauma.
DAI is the second worst-affected stablecoin and is currently trading at $0.936. Based on on-chain data, roughly $563 million worth of DAI was burned as the stablecoin rout took hold of markets.
GUSD fell to $0.96 at one point but has since recovered to $0.988 as of press time. However, it has yet to reclaim its peg.
Tether’s USDT seems unaffected by the current market conditions and is currently trading above its peg at $1.01.
The stablecoin has benefited from the overall selloff, and its dominance is increasing by the minute as investors continue exchanging other coins for USDT.
Most funds also favor USDT, with many exchanging parts of their USDC reserves for USDT. For example, on-chain data shows that Hashed, Spartan Group, and Signum Capital exchanged millions of USDC for USDT following the depeg.
Meanwhile, Jump Trading, Wintermute Trading, Genesis Trading, and BlockTower Capital exchanged millions of USDC for cash through Circle and Coinbase.