The stablecoin fell as low as $0.87 as Circle broke the news that its reserves were at the collapsed lender
The value of the world’s fifth-biggest cryptocurrency, USD Coin , slumped to an all-time low on Saturday after Circle, the US firm behind the coin, revealed that $3.3bn of the reserves backing it were held at Silicon Valley Bank.
“Everyone is working with FDIC [Federal Deposit Insurance Corporation] to stabilize the situation as quickly as possible, to protect jobs, people’s livelihoods, and the entire innovation ecosystem that has served as a tent pole for our economy,” he said. For now, concerns about contagion to other areas of the financial system appeared limited to crypto-currencies early Saturday.
Those businesses, which rely on cheap money and the good-will of investors in search of a “unicorn” – a start-up with a billion-dollar valuation but little by way of cash flow – have been hit hard by rising interest rates., was burdened by using short-term money from depositors to invest in assets that could not be swiftly unloaded to meet customer withdrawals when new depositor funding dried up.
Others, known as"algorithmic stablecoins", attempt to do the same thing but without any reserves. They have been criticised as effectively being backed by Ponzi schemes, since they require continuous inflows of cash to ensure they don't collapse.
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