Report: Traders Making $70 Million Gamble on USDC’s Future

The stablecoin USDC may have regained its dollar peg, but traders may not be in the clear.

USDC traders could risk multi-million dollar liquidations if the stablecoin slips below $1 again this week, according to a report Monday (March 13) by Coindesk, the latest example of the continued fallout from the collapse of Silicon Valley Bank (SVB) last week.

The report says there are nearly $71 million in positions that can be liquidated between $1 and 90 cents, with two recently filled positions on interest protocol Compound being worth a respective $20.7 million and $15.4 million.

USDC regained its dollar peg on Monday after slipping to 86 cents over the weekend because of concerns that its issuer, Circle, had funds at SVB at the time the bank was shut down and placed under control of regulators.

The coin began to recover after Circle said it would use its own money to replace funds that couldn’t be recovered, and then regained its dollar peg once the U.S. Treasury Department, the Federal Reserve and the FDIC said SVB depositors would be made whole and would have access to their funds on Monday.

Following the regulators’ announcement, Circle said the USDC reserve risk had been removed and that the dollar de-peg had been closed, and that no USDC cash reserves were held at Signature Bank.

“Trust, safety and 1:1 redeemability of all USDC in circulation is of paramount importance to Circle, even in the face of bank contagion affecting crypto markets,” Circle Co-founder and CEO Jeremy Allaire said in a news release.

“We are heartened to see the U.S. government and financial regulators take crucial steps to mitigate risks extending from the banking system,” Allaire added. “We’ve long advocated for full-reserve digital currency banking that insulates our base layer of internet money and payment systems from fractional reserve banking risk.”

In a Sunday (March 12) Twitter post, Allaire said Circle had joined forces with Cross River Bank to launch new automated settlement.

While the short-term crisis may be over, Coindesk notes that the first Compound position will be liquidated if the stablecoin hits 99 cents. The second has a 93-cent price point. Liquidations occur when the value of a borrowed asset exceeds collateral, the report notes.