Cryptocurrency Whales Are Harmful! Beware of These Coins!

The Silicon Valley Bank (SVB) and Silvergate collapse, most recently the departure of stablecoin USDC from its stable (de-peg), negatively impacted the cryptocurrency space. According to the data, crypto whales, the big investors in the space, were negatively affected by these developments. Here are the details…

Cryptocurrency whales took a big hit

In response to the phenomenal depegging of the USD Coin (USDC) stablecoin caused by the collapse of its counterpart Silicon Valley Bank (SVB), crypto whales have reported serious losses and appear to be attempting to “fly” their capital to protect assets. Du Jun, co-founder of cryptocurrency exchange Huobi Global shared:

[I] escaped LUNA, I escaped 3AC, I even escaped FTX [and its crashes], but I couldn’t escape Silvergate, SVB, and USDC. I asked a few crypto experts: There were more than $1 billion in losses in stocks and deposits, including mine. I’m so sorry and it’s time to cut my budget.

On the same day, it was reported that Tron founder Justin Sun pulled 82 million USDC from decentralized finance (DeFi) protocol Aave v2 over a series of transactions and exchanged it for Dai (DAI). It is currently worth 82 million USDC, $75.26 million. Speaking of DAI, MakerDAO, behind the DAI stablecoin, released a contingency protocol on March 11 that puts restrictions on DAI minting using USDC to prevent panic selling. MakerDAO is one of the stablecoin’s largest holders, with over 3.1 billion USDC of reserves securing DAI. Following this development, crypto projects that included DAI in their tokens also suffered losses due to a chain reaction.

Daily trading volume on Curve skyrocketed

Curve Finance, a popular DeFi protocol for stablecoin trading, announced that they recorded the highest daily trading volume of all time due to the events. He reported that the transaction volume was $5.67 billion. For comparison, the protocol only has a locked total of $3.77 billion. That is, the daily trading volume has exceeded the value of the locked assets on the platform. Few other platforms could not handle the large volume of USDC related trading requests.

Apart from these, another incident drew attention. As we reported on Kriptokoin.com, a user made a trade that resulted in a permanent loss: He only received 0.05 Tether (USDT) after paying over 2.08 million USDC. KyberSwap, the decentralized exchange where the transaction took place, said it “helped the trader get their funds back” and was in touch with the user.

Will USDC and Circle “make it”?

According to Loki Zeng, a DeFi analyst at New Huo Technology, Circle’s reserves are split between $32.4 billion in treasury instruments, $3.3 billion in deposits at SVB, and $7.8 billion in other financial institutions. According to Zeng, for the USDC to go bankrupt, it must meet three conditions. “There are plentiful deposits at SVB and three other banks at risk, the recovery rate of such deposits remains low and USDC is unable to mitigate such losses,” the analyst says.

Zeng believes it’s “unlikely to be a problem,” adding that his personal view is that even if there were a problem, it wouldn’t be as severe as FTX. The price of USDC is “located at $0.885 in the extreme case and $0.985 in the normal case. At the time of writing, USDC is at $0.958. On the other hand, Alex Svanevik, CEO of Blockchain analytics firm Nansen, also commented that Circle and USDC can “make it”. However, Svanevik also warned that Circle will require “first-class practice over the next few days.” In another tweet, Svanevik also revealed that a user moved 25 million USDC from their PulseX wallet and exchanged it for DAI.