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Sunday, April 2, 2023

USDC is the main asset converted to DEX after the collapse of SVB

Cryptocurrency users turned to DEXuploaded to USDCafter the crash Silicon Valley Bank (SVB). A similar case is the collapse of FTX, which led to a similar exodus from centralized exchanges as users feared they might lose access to funds during crises.


Why did USDC move to DEX after SVB decline?

Outflows from centralized exchanges often increase when markets are in turmoil, a blockchain analytics firm said Chain analysis in a March 16 blog post.

This is because users are likely to worry about losing access to their funds when deals go down. Data from Chainalysis shows that hourly outflows from CEX to DEX increased over 300 million dollars on March 11, shortly after the California regulator shut down SVB.

A similar phenomenon was seen during the collapse of cryptocurrency exchange FTX last year, amid fears that the contagion could spread to other cryptocurrency companies.

However, data from the blockchain analytics platform Token terminal suggest that the increase in daily trading volumes for the major DEXs was short-lived in both cases.

In each case, USDC was identified as one of the main assets transferred to DEX.

Which, according to Chainalysis, is not surprising given that USDC was depegged after the stablecoin issuer ring announced that he had 3.3 billion dollars blocked reserves on SVB, push many CEX, like Coinbase, temporarily suspend trading in USDC.

What was surprising, Chainalysis noted, was the increase in USDC acquisitions on major DEXs such as Curve3pool and Uniswap. Specifically, the blockchain analytics company wrote the following:

“Several sources have seen large increases in user acquisition, but none more so than USDC.”

Chainalysis theorized that this was due to confidence in the stablecoin, with some users of the cryptocurrency loading up on USDC while it was relatively cheap, betting that it would regain its fixation, which it did on the 13th. CoinMarketCap.

USDC bounces back to peg despite SVB

Circle’s stablecoin USD Coin (USDC) is returning to its peg $1 after confirmation from the Director General, Jeremy Allairethat its reserves are safe and that the company has new banking partners lined up “bank open tomorrow morning”.

According to the data of CoinGeckoUSDC rose 3.3% to level in the last 24 hours $0.99.

The price fell as low as $0.87 over the weekend due to concerns 3.3 billion dollars USDC reserves held by Silicon Valley Bankwhich was shut down on March 10 by the California Department of Financial Protection and Innovation.

Circle also has an undisclosed amount of reserves locked up at Silvergaterecently failed.

In the thread about Twitter On March 12, Allaire praised the US government and the Federal Reserve for their $25 billion financing program to support liquidity-challenged banks like SVB, stating:

“100% of the USDC reserves are also safe and we will complete the transfer of SVB’s remaining liquidity to BNY Mellon. As previously stated, liquidity operations for USDC will resume once banks open tomorrow morning.

Allaire added that following the implosion of the crypto-friendly signature bank on March 12, Circle is no longer able to process the minting and redemption of USDC through SigNet and that the company will temporarily rely on agreements through BNY Mellon.

The CEO emphasized that things will move quickly in this regard. Allaire’s statement and the Federal Reserve’s announcement were followed by a significant increase in asset prices worldwide, with the total market capitalization of cryptocurrencies now higher. 1 trillion dollars after falling sharply to $961 billion on March 11.

An analogous case with the collapse of FTX

As expected, a similar case has already happened with the collapse FTP extension. Indeed, platforms DeFi between the FTX crash and the CEX exodus they posted gains. A week after the fall of the FTX chaos and Alamedait is interesting to see what happened to some of the data points in the chain.

Although a record amount bitcoins and Ethereum were leaving exchanges, not all decentralized applications (DApps) and protocols showed growth, mainly due to reliance on FTX and Alameda.

According to Token Terminal’s revenue rankings, the three protocols showed higher revenue at the time 1 million dollars. Ethereum led the on-chain gains with a total of more than $8.5 million, a sign of strong post-merger fundamentals.

Open sea was a distant second behind Ethereum, earning $1.5 million, while nine DeFi protocols and platforms earned more than $100,000. Combined with migration from centralized exchanges (CEX), the volatile cryptocurrency market has users trading in record numbers.

According to data from Token Terminal, Perpetual Exchange’s daily trading volume reached $5 billion, the highest daily trading volume since the collapse LUNA and TerraUSD (FSO) in May 2022.

Author: Alessia Pannone

Source: Cryptonomist

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