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An Update on USDC and Silicon Valley Bank

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Re: An Update on USDC and Silicon Valley Bank

#121

Post by charcircuit »

tempsy wrote: post #60
charcircuit wrote: post #54

Earlier quoted context omitted.

The arbitrage the comment was talking about would be done by people with Circle accounts. If you don't have an account it would be in your interest to sell your USDC for as close to $1 possible. This will inflate the value of USDC on the open market until Circle account holders start to fear that they will be holding the bag.

if major usdc holders who have a circle account were primarily concerned with tiny arbitrage plays they wouldn’t be holding a stablecoin earning zero yield when t-bills pay 5% to begin with

This isn't a tiny arbitrage play because you can repeatedly do it for as long as circle is liquid. Even if you don't hold a lot of USDC it's selling at a discount on the open market. If it goes into a full bankrun all circle accounts will be fighting over what share of the $43.5 billion reserves that they will get.

Re: An Update on USDC and Silicon Valley Bank

#122

Post by Xeoncross »

dragontamer wrote: post #77
obblekk wrote: post #6

23% of the reserve, or $9.7B is held in cash. I think on Thursday, SVB saw cash outflow requests over $40b in one day. USDC peg is so far below 1 right now there will definitely be a lot of par arbitrage Monday trying to withdraw. Hopefully it doesn’t take longer than a day for them to settle treasury trades, and maybe some people have lost the keys to their crypto. They could also possibly have a line of credit with…

3 month (or less) Treasury Bills are damn close to cash. I don't believe they lose value in practice, not even in the rapidly raising interest rate environment of the last year. The problem at Silvergate and Silicon Valley Banks is that they bought 10 year or 30 year bonds, not 3 month bills. Its a completely different composition, with completely different properties.

Why lock up the money for so long in such an unstable time as this? Better interest rates?

Re: An Update on USDC and Silicon Valley Bank

#123

Post by Laaas »

bhaak wrote: post #8
bb88 wrote: post #3

After the fall of Terra, it's clear that stablecoins can only go down in value. There's also no FDIC to step in to take over the failing stablecoin. You're trusting USDC and by extension BlackRock to do the right thing here. If it's not a security than it's not regulated.

Terra was no stablecoin and it has been constantly pointed out that it wasn't. USDC is backed 1 USDC for 1 USD. What you're actually seeing here is that the traditional finance system has lead to a crash in crypto. That's almost refreshing. Usually crypto fucks up by itself (see FTX and Terra for the most recent ones).

Arguably, the FTX debacle is in the same bucket, as it was caused by people having their money on an exchange that essentially functioned like a fractional reserve bank.

Re: An Update on USDC and Silicon Valley Bank

#124

Post by dragontamer »

Xeoncross wrote: post #122
dragontamer wrote: post #77

Earlier quoted context omitted.

3 month (or less) Treasury Bills are damn close to cash. I don't believe they lose value in practice, not even in the rapidly raising interest rate environment of the last year. The problem at Silvergate and Silicon Valley Banks is that they bought 10 year or 30 year bonds, not 3 month bills. Its a completely different composition, with completely different properties.

Why lock up the money for so long in such an unstable time as this? Better interest rates?

> Better interest rates?

You betcha.

Here's the rates for March 2021. 3M would have gotten you 0.05% APY, while 10Y gets you 1.45% APY.

https://home.treasury.gov/resource-center/data-chart-center/...

Re: An Update on USDC and Silicon Valley Bank

#125

Post by rvnx »

dragontamer wrote: post #124
Xeoncross wrote: post #122

Earlier quoted context omitted.

Why lock up the money for so long in such an unstable time as this? Better interest rates?

> Better interest rates? You betcha. Here's the rates for March 2021. 3M would have gotten you 0.05% APY, while 10Y gets you 1.45% APY. https://home.treasury.gov/resource-center/data-chart-center/...

Yeah, it sounded like a perfect plan if no customers wanted to get their funds within the next 10 years. ¯\_(ツ)_/¯

Re: An Update on USDC and Silicon Valley Bank

#126

Post by dzink »

Circle moved assets out of somewhere and into BNY Mellon last week. Where is that somewhere (Was it SVB, since 3.3Bn “remain” in SVB?). When did they move money out of SVB and how much?

Did Circle and USDC trigger the sudden liquidity gap in SVP that triggered the fire sale of 21B at a loss? Is the crypto panic triggering the bank runs?

“Last week, we took action to reduce bank risk and deposited $5.4bn with BNY Mellon, one of the largest and most stable financial institutions in the world, known for the strength of their balance sheet and as a custodian.

$3.3bn of USDC’s cash reserves remain with SVB. As of Thursday, we had initiated transfers of these funds to other banking partners. ”

Re: An Update on USDC and Silicon Valley Bank

#127

Post by wbl »

tempsy wrote: post #42
obblekk wrote: post #6

23% of the reserve, or $9.7B is held in cash. I think on Thursday, SVB saw cash outflow requests over $40b in one day. USDC peg is so far below 1 right now there will definitely be a lot of par arbitrage Monday trying to withdraw. Hopefully it doesn’t take longer than a day for them to settle treasury trades, and maybe some people have lost the keys to their crypto. They could also possibly have a line of credit with…

how is it “so far below” it’s recovered to less than a 4% discount

Remember when Primary reserve broke the buck and got unwound? That was over a smaller deviation than this.

Re: An Update on USDC and Silicon Valley Bank

#128

Post by 3np »

echelon wrote: post #29
obblekk wrote: post #6

23% of the reserve, or $9.7B is held in cash. I think on Thursday, SVB saw cash outflow requests over $40b in one day. USDC peg is so far below 1 right now there will definitely be a lot of par arbitrage Monday trying to withdraw. Hopefully it doesn’t take longer than a day for them to settle treasury trades, and maybe some people have lost the keys to their crypto. They could also possibly have a line of credit with…

The creators of USDC could destroy their own coins to restore the 1:1 reserve peg. I doubt they'd do it, but it would immediately restore confidence. Send them to a null address or commit to burning them in software. If they can restore the reserve, they could remint them. I'm a crypto bear (with modest crypto holdings for diversification), and I think this is an opportunity for these folks to step up to the plate an…

> The creators of USDC could destroy their own coins to restore the 1:1 reserve peg.

This is already what happens with redemptions, which as per OP should resume on Monday.

Re: An Update on USDC and Silicon Valley Bank

#129

Post by danielvf »

everfree wrote: post #110
braingenious wrote: post #83

Earlier quoted context omitted.

I’m hearing that you can’t even use USDC to exchange for bitcoin/ETH on Coinbase right now. What does converting between types of crypto have to do with banks? Those transactions should in theory have nothing to do with a banking transaction. It seems like they’re simply forcing people to hold USDC, full stop, and are blaming banks for their decision to do so.

For better or worse, Coinbase does not have a USDC/USD trading pair, or USDC trading pairs with most cryptos (BTC, ETH, etc.). For the most part they have USD trading pairs, which if you have USDC you're typically expected to access by redeeming your USDC for USD and then using the USD trading pairs. But since USDC to USD redemption is halted for now, you effectively cannot trade USDC for most common cryptocurrencies…

That's not true, Coinbase has active USDC/USDT, USDC/EUR, and USDC/GBP pairs. I've traded on them overnight. They just disabled the 1-1 conversion with USD.

Re: An Update on USDC and Silicon Valley Bank

#130

Post by paulryanrogers »

nightmarish wrote: post #106
braingenious wrote: post #84

Earlier quoted context omitted.

>If my pastry shop runs out of already baked goods during the AM peak If your pastry shop had 40 billion donuts, and you claim that 10 billion of those donuts are available for sale immediately, do you close your shop when you lose 3.3 billion of them, leaving you with only 6.7 billion donuts that are still sitting there?

Yea because it’s way better for the customers to believe the illusion that I have 40 billion than to find out I only had let’s say… 5

Wait, what value is there in the illusion? Some customers may be unable to wait, regardless of a run or not. And if they cannot count on you now then at least they would know to avoid you in the future.
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