Those looking to stablecoin issuer Circle as crypto’s next fire sale may have to look elsewhere.
At the time of writing, Circle’s U.S. dollar-pegged stablecoin has almost regained its full value after dropping 13% on Saturday. It currently trades for around $0.99, according to data from market aggregator CoinGecko.
Another key indicator that market confidence in Circle may be returning is the fact that early Monday morning, Circle minted nearly half a billion dollars in USDC, according to on-chain analytics by blockchain data company Nansen.
Circle minted $407.8 million $USDC about 10 minutes ago
This is the largest USDC minting in the last 7 days
Hourly net change: +$463.8 million#NansenQuery pic.twitter.com/WnHr0lsFyy
— Nansen 🧭 (@nansen_ai) March 13, 2023
This large mint essentially shows that one client deposited $407.8 million into their Circle account to mint an equivalent amount of USDC.
Nansen data journalist Martin Lee told Decrypt that, while he doesn’t know the identity of the client (whether institutional or retail), “we do see a large 233.4M transfer to Coinbase ~1 hour after the mint.”
Lee warned that the market may still be a little on edge, too.
"There might still be residual caution and loss in confidence in fiat-backed stablecoins in general as people are reminded of the risks and fragility of the traditional banking system which holds the dollars used to back those stablecoins,” he said.
However, the import of these recent developments can’t be denied; the popular stablecoin and its issuer appear to be recovering.
Lee said that “broadly speaking, people are confident that the current issues that Circle is facing will get resolved without any large negative financial implication."
Circle's ties to SVB
When Circle disclosed on Friday night that it held some $3.3 billion in cash reserves in the now-collapsed Silicon Valley Bank (SVB), its stablecoin, USDC, which is normally redeemable 1:1 with the greenback, fell to $0.87, its lowest value since 2019.
In reality, Circle’s exposure to the beleaguered bank accounts for less than 10% of the total $42.1 billion cash reserves underpinning the value of USDC. This weekend, Circle also vowed to cover the shortfall through corporate resources and “external capital, if necessary.”
Come Monday, Circle recaptured lost ground, largely off the back of news that heavy intervention by regulators on both sides of the Atlantic would make SVB’s depositors whole.
A joint statement by the U.S. Federal Reserve Chairman Jerome Powell, U.S. Treasury Secretary Janet Yellen, and Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg emphasized that U.S. taxpayers will not bear losses as a result of the bank’s closure.
In addition, the British HM Treasury—the UK’s Finance Ministry—intervened to broker a bailout deal in which HSBC acquired the British arm of SVB for £1 to make whole British businesses with exposure to the bank.