How USDC Stablecoin Depegging Could Break Many Crypto Firms But Bitcoin Will be Stronger

cryptonews.com:

USDC stablecoin is depegging – and at an alarming rate – falling to as low as $0.89, way off its $1 peg.

Volatility is expected to continue throughout the weekend as panic sets in after the Silicon Valley Bank collapse.

The failure of SVB is hurting the reserve position of USDC, which is issued by Circle. 

Members of the consortium behind the USDC stablecoin include Coinbase, the largest exchange in the US. Coinbase could see its share price come under pressure when markets open on Monday.

In a tweet last night, Circle let it be known that USDC has a quarter of its reserves in cash held at 7 banking partners, including Silvergate and SVB. USDC has $3.3 billion tied up at SVB.

The remainder of USDC's reserves are in short-dated US Treasuries money market funds held at BNY Mellon Bank.

Unfortunately for many USDC depositors – which are mostly tech startups and VCs – the vast majority of their funds are not insured by the Federal Deposit Insurance Association (FDIC), as the guarantee only covers the first $250,000.

The California Department of Financial Protection and Innovation took control of SVB – and made the FDIC the receiver – after depositors initiated a run on the bank by trying to withdraw as much as $45 billion on Thursday.

USDC is the second-largest stablecoin in the crypto ecosystem and is an essential part of the industry's plumbing.

The trouble began for SVB when it was forced to sell its long-dated US Treasuries at a loss. 

SVB had been using customer deposits to buy long-dated US government bonds that it intended to hold to maturity for a small yet reliable return. This is common practice in the fractional banking model that underpins modern banking.

But in order to meet deposit withdrawal demands, SVB had to sell