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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

#131

Post by pcthrowaway »

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…

It's kind of meaningless for them to destroy it, when they can just mint more anyway.

Re: An Update on USDC and Silicon Valley Bank

#132

Post by tgsovlerkhgsel »

charcircuit wrote: post #39
bb88 wrote: post #18

Earlier quoted context omitted.

Pausing USDC->USD over the weekend isn't going to help confidence either.

USDC -> USD always only ever worked during banking hours. Exchanges offering USDC USD at any time have had to account for this and have enough reserves of USD and USDC themselves.

Would they really need USD reserves? Until the USD is withdrawn, it's just an entry on their internal ledger, and it can't be withdrawn outside business hours, and during business hours they can then exchange the USDC for USD.

Re: An Update on USDC and Silicon Valley Bank

#133

Post by pishpash »

dzink wrote: post #126

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 Mell…

Crypto first, tech second, then crypto/tech intermediaries, then exposed regional banks, then funds and general banks, etc. etc.

Re: An Update on USDC and Silicon Valley Bank

#134

Post by everfree »

danielvf wrote: post #129
everfree wrote: post #110

Earlier quoted context omitted.

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.

My bad. Looks like they added those pairs in 2021 and I didn't notice (though it looks like you have to "opt out of the USD and USDC unified experience" in order to access them). I edited my comment accordingly.

Re: An Update on USDC and Silicon Valley Bank

#135

Post by charcircuit »

tgsovlerkhgsel wrote: post #132
charcircuit wrote: post #39

Earlier quoted context omitted.

USDC -> USD always only ever worked during banking hours. Exchanges offering USDC USD at any time have had to account for this and have enough reserves of USD and USDC themselves.

Would they really need USD reserves? Until the USD is withdrawn, it's just an entry on their internal ledger, and it can't be withdrawn outside business hours, and during business hours they can then exchange the USDC for USD.

It limits risk in the case of a depeg where you are unable to exchange USDC back into USD. You don't want all your company's assets to be exchanged into USDC.

Re: An Update on USDC and Silicon Valley Bank

#136

Post by pishpash »

WalterSear wrote: post #45
bb88 wrote: post #24

Earlier quoted context omitted.

Can one short USDC with leverage?

Short? I can't see this not returning to it's peg by the next news cycle. It's free money. SVB went bankrupt - as a business: it can't pay its bills. People are reacting to this as if the deposits have vanished entirely. If you think USDC is a shorting opportunity, short anything crypto. USDC is literally the second largest domino.

Vultures are offering 60%-80% on SVB-held funds, so that's where they expect recovery to be at.

Re: An Update on USDC and Silicon Valley Bank

#137

Post by spywaregorilla »

rvnx wrote: post #125
dragontamer wrote: post #124

Earlier quoted context omitted.

> 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)_/¯

No that's not it. You can sell the bonds any time. But now they're worth considerably less because interest rates are much higher now. They locked themselves in at rate that are now terrible for 10 years.

Re: An Update on USDC and Silicon Valley Bank

#138

Post by pishpash »

z3c0 wrote: post #57
bhaak wrote: post #11

Earlier quoted context omitted.

The peg is held up by the belief that you can always get 1 USD for 1 USDC. Obviously the market had some doubts about this today and then liquidity issues drove the price down. I'm somewhat surprised that it climbed back up this fast which means that the panic seems to be over (for the moment).

I guess this was one of those "be greedy when everyone is being fearful" moments. An easy ~10% return.

10% really is not enough to compensate for the uncertainty around Circle's commitment, whatever that is. More like be greedy when you have insider information.

Re: An Update on USDC and Silicon Valley Bank

#139

Post by dmak »

323 wrote: post #75
bb88 wrote: post #24

Earlier quoted context omitted.

Can one short USDC with leverage?

Yes, by creating a synthetic - you short BTC/USDC and long BTC/USD. This will create a USDC/USD synthetic. Both BTC/USDC and BTC/USD can offer up to 100x leverage, so the synthetic USDC will also be up to 100x. Of course, there is a long list of risks in such a trade, and if you need to ask about it it's not for you.

I am curious to read more about the risks, but don't plan to make this trade. Could you share a few points just to give me a direction to dig deeper?

Re: An Update on USDC and Silicon Valley Bank

#140

Post by easrng »

capableweb wrote: post #59
braingenious wrote: post #56

I’m not very knowledgeable on this topic, so I have a legit question about all of this: How is pausing withdrawals not blatant currency manipulation? If I had USDC and lost all faith in it yesterday, shouldn’t I be allowed to cash out today? Also, if they’ve got many billions in cash, why would losing access to a sliver of it justify shutting down withdrawals? “Trust us, it’s worth a dollar! Or don’t trust us! It doe…

Imagine that you use a currency made by a specific company, lets say it's called PaypalCoin. Part of the value of the currency is that the company manages it, part of the risk is that a company manages it. So you'll only be able to exchange it for X as long as Paypal say you can exchange it for X. This is part of what PaypalCoin is, so if you use it, you should be aware of this. This is basically what USDC is, and Ci…

If Circle blacklists you and your funds you can't do anything with them at all afaik.
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