- The price of the US dollar fell significantly after the fall of the Silicon Valley Bank (SIVB).
- The USDC stablecoin has had $3.3 billion in exposure to the collapsed bank.
- The circuit has engaged in a series of burns and minting of new tokens to stabilize the cryptocurrency.
The blockchain data and research platform, Nansen, tweeted that Circle’s USDC stablecoin has recovered to around $0.97 after the token burn. The price of the stablecoin dropped dramatically after the fall of the Silicon Valley Bank (SIVB). Hence, the issuing company, Circle, has engaged in a series of burns and minting new tokens to stabilize the cryptocurrency.
According to Nansen, Circle burned $649.3 million in pennies and $16.7 million in pennies within 24 hours. That was after $2.34 million was burned and $366 million minted the previous day. The exercise helped the US dollar price recover, after it fell sharply to $0.88 earlier in the day.
…when $2.34B burned and $366M struck https://t.co/qyieOTdePO
— Nansen (@nansen_ai) March 12, 2023
USDC became one of the immediate victims of the SIVB fallout after sources revealed it had $3.3 billion in exposure to the collapsed bank. The effect of this meant that the stablecoin lost its currency peg to the dollar, which led to an immediate crash in prices.
In the aftermath of the crash, Circle reassured the public that it would continue to operate standard services while waiting for clarity on how the FDIC’s receivership would affect depositors. Hence, the flaring and raking process initiated by Circle is in line with procedures to provide standard services to its clients.
Stablecoins burn tokens to maintain their value pegged to the dollar during unusual market behaviors. The need to burn stablecoins arises from increased demand which leads to lower prices. Under these scenarios, the smart contract will burn coins to push the price and issue new tokens to balance the market price.
Burning involves sending tokens to a one-way wallet that only can receive them. This permanently removes these tokens from the available supply, thus reducing the number in circulation.
USD/USD has always hovered around $1, making the crash to $0.88 unprecedented. Its all-time low is $0.97 in 2018. Last year, even in the midst of the Three Capitals crash, the US dollar fell to just under $0.99.
The Circle post burning nearly $650 million, recovering from an unprecedented crash, appeared for the first time in Coin Edition.