On Saturday, USD Coin (USDC) dropped to below 90 cents and showed little sign of recovering, causing traders to shift their capital to other stablecoins. During Asian morning hours, USDC traded at 87 cents, marking an all-time low, but has since slightly rebounded to slightly above 90 cents in Asian evening hours. Some traders are optimistic about USDC's potential to gradually recover and reach the $1 mark, purchasing the token at its current discounted price for a potential 10% gain if it returns to its intended value.
The use of leverage by traders to increase returns on their bets for a USDC rebound caused the futures funding rates on Bybit, a crypto exchange, to surge up to 0.3% on Saturday. This rate allowed traders to earn up to 0.3% in fees from their total market position, with short-sellers paying over 0.4% to borrow USDC and bet on its lower prices. Coinglass data showed that approximately $4 million in USDC futures were liquidated in the past 24 hours. In addition to this, Maker's decentralized stablecoin, dai (DAI), also depegged from its intended $1 mark on Saturday, hitting an all-time low of 88 cents amid market stress.
The recent collapse of Silicon Valley Bank (SVB) on Friday resulted in a market-wide drop for cryptocurrencies as traders discovered that some major players in the industry had exposure to the bank, including Circle, a US-based stablecoin issuer that held a portion of its USDC stablecoin's cash reserves at SVB as of Jan. 17. A Circle spokesperson explained that SVB was one of the six banks used by the firm to manage about 25% of its USDC reserves held in cash.