Insolvency fears led many to turn to other stablecoins, sell USDC at a major discount

Several USD Coin (USDC) holders have fled to other stablecoins since March 10 amid fears surrounding its solvency following the disclosure that a small portion of USDC’s collateral was held at Silicon Valley Bank.

However, not all of them had success during panic selling. One user paid over 2,000,000 USDC to receive $0.05 of Tether (USDT) by dumping a large amount of 3CRV (DAI/USDC/USDT) into USDT.

KyberSwap aggregation router was used in the transaction. Kyberswap is a decentralized exchange (DEX) that aggregates liquidity from several DEXs. In a postmortem, the protocol team explained that “since the market was undergoing a volatile period, all routes failed at estimating gas. The rate strongly fluctuated & only 0x’s route was successful but with a very poor rate.”

After confirming the swap at 0x’s rate in a pop-up, a bot detected the opportunity and gained 2,085,256 USDC from that Univ2 pool. The protocol is in talks with the bot creator, the bot user and third parties to assist with funds recovery.

Also moving funds to other stablecoins, Tron founder Justin Sun reportedly withdrew 82 million USDC using the decentralized finance protocol Aave v2 and swapped it for Dai (DAI), worth nearly $75 million.

Wallets related to IOSG Ventures sold 118.73 million USDC for 105.67 million USDT, as well as 2,756 Ether (ETH) worth $3.98 million via three addresses, on-chain data shows. The institution still holds nearly 45 million in USDC.

Curve 3pool share is the bellwether of crypto sentiment

During today’s USDC depeg, ppl panic sold USDC & DAI for USDT. USDT share in 3pool collapsed to 2%

Ironically, when Tether FUD happened during Terra crash & FTX collapse, USDT was the “infamous” & left 85% in 3pool pic.twitter.com/VNo3ykxiob

— Panda Jackson (@pandajackson42) March 11, 2023

The USDC price is slowly recovering after turbulent trading hours on March 11 to trade at $0.97 at the time of publication. 

Circle, the company behind the USDC, disclosed holding $3.3 billion at the Silicon Valley Bank, nearly 23% of its reserves. The bank was shut down by California authorities on March 10 after disclosing efforts to raise extra capital.

Circle said in a recent statement that USDC liquidity operations will “resume as normal when banks open on Monday morning in the United States,” enabling USDC redemption at 1:1 with the U.S. dollar.