Stablecoins No More Stable: After USDC Depeg, Is Tether’s USDT in Trouble?
The collapse of Silicon Valley Bank (SVB) has caused worry in the crypto industry, especially for investors who use stablecoins like USDC and USDT. Let’s see how this affects these stablecoins.
USDC and SVB
Circle, the company behind USDC, had $3.3 billion or 8% of its reserves at Silicon Valley Bank (SVB) before its collapse. Now, Circle is facing a high number of people withdrawing their funds, causing the value of USDC to decrease. As a result, some exchanges like Coinbase and Binance have suspended certain transactions involving USDC.
However, Circle still has access to other banking partners and most of its USDC reserves are invested in short-term US treasuries and US banks. Despite these challenges, Circle is actively working to maintain the stability of USDC.
USDT and the Financial Sector
Tether’s USDT stablecoin also faces concerns about exposure to the financial sector. With the collapse of banks like Silvergate Capital, investors are concerned about the stability of USDT and other stablecoins that are usually backed by fiat currencies held in these banks.
USDT was originally created as a way to allow cryptocurrency traders to use a stable asset for trading and arbitrage purposes, without the need to convert back and forth between cryptocurrencies and fiat currencies like the US dollar.
USDT is audited by BDO, one of the biggest audit companies, and its financial statements show that most of its reserves are in cash and cash equivalents, including US Treasury bills, money market funds, and cash in banks. The latter represents about 9.66% or about $6.8 billion of Tether’s reserves, which can cover significant outflows.
Stablecoin Safety Measures
Both Circle and Tether have taken measures to ensure the safety of their stablecoins. Circle’s cash reserves are stored at the Bank of New York Mellon, the biggest custody bank in the world, while Tether’s reserves are held in a variety of cash equivalents.
Stablecoin investors and companies must stay vigilant and ensure they have robust risk management strategies in place to mitigate potential shocks or disruptions. The stability of the crypto industry is closely tied to the health of the traditional banking system, and as crypto continues to grow and mature, it is essential to prepare for potential risks and take steps to minimize them.
Bitcoin , A Stable Asset, Non-Impacted By FED Rate Hikes
The crypto market has turned red again as the majority of cryptocurrencies have dropped in value. Bitcoin has lost its crucial level of $19,200 and is leading the bear trend, causing other assets to crash as well.
The crypto market is known for its correlation with the US stock market, especially Bitcoin and S&P 500. The US market is riddled with uncertainty at the moment, which has led to a similar scenario in the crypto space too.
However, a well-known Bloomberg commodity strategist, Mike McGlone, believes that Bitcoin might soon be stepping into a massive maturation phase. To explain the claim briefly, he compared this to the current crude price of $84 per barrel, which was last seen in October 2007.
He further says that during the recent interest rate hike by the Federal Reserve, the flagship currency was not highly affected, which indicates Bitcoin’s stability.
Decrease In Bitcoin Supply
McGlone also throws light on the latest developments such as the increase in outflows. Recently, on October 18, crypto exchanges saw an outflow of around $40,000 Bitcoins, which is the largest outflow in the last two months.
The same is reported by analytical firm, Santiment, which claims that the currency’s supply on exchanges has dropped by 8.48%. The report also asserts that as supply decreases on exchanges, it also decreases the chance for sell-off in future.
Conversely, the firm also reports that the social dominance of Bitcoin has dropped, indicating increased bearish momentum.
Hence, the next few days are very crucial for the Bitcoin price.
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G20 Central Bankers: Stablecoins Are Not “Stable,” Suggests Action Against Crypto
The post G20 Central Bankers: Stablecoins Are Not “Stable,” Suggests Action Against Crypto appeared first on Coinpedia Fintech News
The Financial Stability Board, a group of G20 central bankers and financial regulators, has emphasized that stablecoins are not stable.
No stablecoin currently satisfies the parameters set for the digital asset category by the world’s major central bankers, and many stablecoins “do not have credible systems to guarantee their claim of price stability,” according to a report released today by the Financial Stability Board.
The board also questioned how “stable” stablecoins really are.
The board also issued high-level recommendations for governing digital currencies, with a more thorough report due by the middle of next year.