TLDR; 75% of the US dollars backing UDSC are held in US Treasury Bonds (virtually safest asset on the planet). The downside is thus very limited.<p>There is a lot of FUD right now. But Circle (company responsible for the peg USDC <> USD) is actually very transparent and the data is independently audited every month (https://www.circle.com/en/transparency):<p>Last month, Circle had $43.4B in assets.
They've announced that $3.3B is exposed to SVB: that's approximately 7.6% of their assets (unclear how much they have right now, but it's in that horizon).
In January, a total of $11.1B was held at banks (SVB+others). Everything else ($32.4B or approximately 75% of assets) is held in a fund as US Treasury Bonds. 75% of Circle's assets are thus basically insured by the US itself.<p>Meaning that even if SVB were to give nothing back of the $3.3B it owes to Circle (unlikely, they'd at least get <i>some of it</i> back), the loss would be limited at around 7.6%. In the even less likely case of a total collapse of <i>all</i> the banks they're using, about 1/4 at most would be lost to the banks.<p>This isn't a Terra make over. Very different situation. This is a well structured company with lots of due diligence and auditing proving the safety of the assets. Chill out, everything's gonna be alright.<p>Disclaimer: not financial advice. I'm just a normal guy who can open a PDF and read the data.
That's not so simple. I agree USDC is still in a solid position, markets are overreacting, and this is very different than e.g. Terra collapse. But you're assuming any eventual losses (e.g. the 7.6%) would be equally distributed across all users. That is not the case.<p>If there's a run on the bank, the first users will get 100% of their funds at 1:1 peg (see Circle's announcement earlier today [1]), <i>until they run out of liquidity</i>. Then the remaining users are left holding the bag, and get a fraction of whatever is left after months of litigation.<p>The fear of being the last one holding the bag is what triggers bank runs, despite a bank run being the worst possible outcome for everyone. It's a classic prisoner's dilemma.<p>ps: not financial advice, etc, etc.<p>[1] <a href="https://www.circle.com/blog/an-update-on-usdc-and-silicon-valley-bank" rel="nofollow">https://www.circle.com/blog/an-update-on-usdc-and-silicon-va...</a>
Exactly.<p>Unlike the complete irrational panic on the depegging by HNers here on many threads, as usual and from those who don't know the difference between an algorithmic stablecoin and a centralized one.<p>As I said before [0] USDC is fine and it will re-peg to $1 and it will be business as usual. Ignore the USDC FUD, hyperbolics and the headlines and concentrate on the main concern which is the startups that have the majority or 100% of their VC cash on SVB and can't pay their employees.<p>[0] <a href="https://news.ycombinator.com/item?id=35108665" rel="nofollow">https://news.ycombinator.com/item?id=35108665</a>
Yeah but treasures lost money last year. If usdc has duration risk which I’m sure they do they are probably under capitalized. What could easily happen is an alternate stable coin comes in offer say 4% while investing in T-bills and pocketing the one %. People will then cash out of usdc and move to something better forcing usdc to fail
> TLDR; 75% of the US dollars backing UDSC are held in US Treasury Bonds (virtually safest asset on the planet). The downside is thus very limited.<p>What's the duration on the bonds? SVB was holding lots of Treasury bonds, but with 10-year maturities, so they weren't safe from interest rate risk.