#1. Some cryptocurrencies may benefit from the USDC crisis
After Circle announced that $3.3bn of the reserves backing it were held at Silicon Valley Bank (SVB), the value of USD Coin (USDC) slumped to an all-time low. The massive sell-off USDC quickly spread to other stablecoins except Tether (USDT). It means that investors tend to put their trust in coins with high trading volume as Tether. It is predicted that this massive sell-off will somewhat keep the prices of other coins with high trading volume such as Bitcoin (BTC), Ethereum (ETH), etc.
#2. It will be more difficult for DeFi market
To understand how important USDC is in the DeFi space, take a look at the following chart, especially the dark blue part.
If Tether’s stablecoin market share dominates in the centralized exchanges, in the DeFi world, USDC’s market share accounts for 40.8%. Therefore, once USDC plummeted, all DeFi protocols suffered the same fate. Even if it is not yet known whether Circle will be able to withdraw money from SVB, fears are enough for investors to withdraw funds from DeFi. During the last weekends, the USDC liquidity ratio of Curve’s 3pool reached over 88% and is now still above 50%.
Some predictions for DeFi:
- If Circle cannot get the full amount of collateral in SVB, USDC confidence crisis will lead to the collapse of many projects and of other stablecoins being “backed by USDC”.
- If Circle can withdraw or suffers little loss, investors will start to care about where Circle will keep reserve deposits? How? Will the same thing happen again? Before SVB collapsed, not many people knew that Circle sent money in SVB.
- Many investors begin to doubt “what is DeFi?” Isn’t it decentralized finance? But why is everything dependent on a traditional centralized bank like SVB?
#3. Bitcoin has a chance to prove its value
We know that Bitcoin was created as a result of the 2008 crisis and now history seems to go back, Bitcoin has a chance to prove itself. This doesn’t mean the BTC price will continue to rise but wait until people realize that holding Bitcoin will have more advantages than depositing money in the bank, the story of Bitcoin will turn to the next chapter.