Circle’s USDC instability causes domino effect on DAI, USDD stablecoins
The stablecoin ecosystem felt an immediate effect as USD Coin (USDC) depegged from the US dollar due to a subsequent sell-off after Silicon Valley Bank (SVB) did not process $.3.3 billion of Circle’s $40 million transfer request. Given USDC’s collateral influence, major stablecoin ecosystems followed suit in depegging from the dollar.
Dai (DAI), a stablecoin issued by MakerDAO, lost 7.4% of its value as a result of USDC’s depegging. As of June 2022, $6.78 billion worth of DAI supply was collateralized by $8.52 billion worth of cryptocurrencies, confirms data from Statista.
Out of the lot, USDC represented 51.87% of DAI’s collateral, worth $4.42 billion. Other prominent cryptocurrencies include Ether (ETH) and Pax Dollar (USDP) at $0.66 billion and $0.61 billion respectively.
As a result, DAI depegged from the dollar to momentarily touch $0.897. The stablecoin recovered to trade around the $0.92 mark at the time of writing, as shown below.
USD Digital (USDD), another stablecoin issued by Tron blockchain, and fractional-algorithmic stablecoin Frax (FRAX) shared a similar fate due to negative market sentiments. USDD responded to the USDC sell-off with a nearly 7.5% drop to trade at $0.925 while FRAX dipped even further to $0.885.
Other popular cryptocurrencies, such as Tether (USDT) and Binance USD (BUSD), continue to maintain a 1:1 peg with the US dollar.
Related: USDC investor shells out $2M to receive $0.05 USDT trying to evade crash
The entire depegging ordeal started after Circle announced that $3.3 billion of its funds were not processed for withdrawal by SVB.
1/ Following the confirmation at the end of today that the wires initiated on Thursday to remove balances were not yet processed, $3.3 billion of the ~$40
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