The depegging of USDC stablecoin from its $1 value is causing concern as it falls to as low as $0.89. Panic has set in following the collapse of Silicon Valley Bank (SVB), which is hurting USDC’s reserve position as it has $3.3 billion tied up at SVB. The majority of USDC depositors, which are mostly tech startups and venture capitalists, will not be covered by the Federal Deposit Insurance Association (FDIC) guarantee, as it only covers the first $250,000. The collapse of SVB highlights the use case of bitcoin as a store of value. Other stablecoins, such as DAI, are also at risk. Ethereum gas fees have surged to over 300+ Gwei due to the repositioning of funds from the SVB contagion. Traders who are not afraid of high-risk investments could make money by buying USDC in its depegged state and redeeming it for $1 on Monday, however, this is a highly risky strategy. The FDIC’s handling of SVB’s uninsured deposits will be closely watched, and finding a buyer for the bank may prove difficult.
