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An Update on USDC and Silicon Valley Bank

circle.com

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Re: An Update on USDC and Silicon Valley Bank

#171

Post by benjaminwootton »

spywaregorilla wrote: post #137
rvnx wrote: post #125

Earlier quoted context omitted.

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.

But surely there's a high chance of rates rising and your collateral falling in value over a ten year duration?

It seems like madness to leave yourself totally exposed to a situation like this. Rates rise, your investments fall and your depositors want their money back doesn't sound beyond the realms of the imagination.

Re: An Update on USDC and Silicon Valley Bank

#172

Post by netheril96 »

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…

> Send them to a null address or commit to burning them in software.

This only has effect for coins with a fixed supply or at least of fixed schedule of supply.

Re: An Update on USDC and Silicon Valley Bank

#173

Post by xivzgrev »

In my understanding all accounts up to insured limit will get paid Monday. everything else is going to have to file a claim which could take a long time to resolve.

Seems like about 8% their assets will be locked up / at risk. For a company that promises to have 100% of assets backed up / readily accessible, I wouldn’t be surprised if this triggers a run.

Re: An Update on USDC and Silicon Valley Bank

#174

Post by tylerhou »

SparkyMcUnicorn wrote: post #150
latchkey wrote: post #105

Earlier quoted context omitted.

> Right now, Circle isn't willing to buy USDC for $1 USD https://www.circle.com/blog/an-update-on-usdc-and-silicon-va...

Where does it say that? All I see is the exact opposite being said.

> As a regulated payment token, USDC will remain redeemable 1 for 1 with the U.S. Dollar.

Re: An Update on USDC and Silicon Valley Bank

#175

Post by anonymousiam »

SilasX wrote: post #61
bb88 wrote: post #24

Earlier quoted context omitted.

Can one short USDC with leverage?

Yes, and I have been, by accident! I borrowed USDC on Compound.finance a while ago, using wrapped bitcoin as collateral and the loan remains open. I was intending to just extract some equity from my BTC without selling it, not profit from crashes, but that effectively gives me a short position since I benefit from USDC being easier to buy and thus settle my debt. Last night I bought at a ~6% discount on Gemini.

Yeah, but your BTC lost 20% of its value over the same period.

Re: An Update on USDC and Silicon Valley Bank

#176

Post by tsimionescu »

beezle wrote: post #157
hn_throwaway_99 wrote: post #153

Earlier quoted context omitted.

No, rvnx is correct. SVB held many of these assets as "hold to maturity" assets. Point being, if all of their customers didn't need to withdraw their money, then SVB would have been fine, as they could have safely held these assets to maturity and then redeemed them for full face value. The problem is that just when their long duration bonds lost value is also when their startup-heavy customer base needed their money…

No, the problem was that VC's led and pushed for the panic withdraw of all funds. The bank would have had no problem if it was just the case of fewer new deposits. As to expense draw downs, those would have been ongoing and part of normal business operation.

It was a panic becaaue they realized the bank was vulnerable and so their money was vulnerable. This wasn't an irrational panic, it was the kind of panic you experience when being chased by a bear.

Re: An Update on USDC and Silicon Valley Bank

#177

Post by jacobsimon »

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…

Had the same thought, but why would they choose to reduce bank risk unless they already knew about the liquidity gap?

Re: An Update on USDC and Silicon Valley Bank

#178

Post by tsimionescu »

TedDoesntTalk wrote: post #160
PheonixPharts wrote: post #155

Earlier quoted context omitted.

I don't think you understand my question or the issue at hand, but I think I have found some answers. It doesn't matter if it was already $1 right now. The assumption is that everyone purchasing USDC today when it was below $1 is planning on selling it Monday as a quick arbitrage. Assuming the peg is restored by Monday, Circle is still going to have to have a lot of liquidity to meet the demands of a huge number of p…

> I would point out that this "arbitrage" existing for more than a brief moment implies there are lots of people who do not believe that Circle can meet these demands and are happily unloading their positions I thought 1 new coin is created for each new $1

That is their promise, and I've ready previously that they do have some audits that verified it (unlike Tether, which used to make a similar claim).

However, another important question is what actually happens to that dollar - are they actually able to wire you that dollar if you hand them back 1 USDC? For 3.3bn of those dollars, we know they are not currently able to, since those 3.3bn are tied up in SVB, which isn't itself able to wire them to anyone. Hopefully, the rest of the them are more available, but it remains to be seen.

Re: An Update on USDC and Silicon Valley Bank

#179

Post by tsimionescu »

baq wrote: post #76
l-lousy wrote: post #36

Earlier quoted context omitted.

That day will be when they finally release an audit

This will never happen, it’ll have to be when redemptions stop working.

Is there any proof that anyone has ever successfully redeemed USDT from Tether?
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