Is Circle’s USDC Stablecoin Crisis a Boon for Bitcoin?
The recent crisis surrounding Circle’s USD Coin (USDC) stablecoin may have inadvertently strengthened Bitcoin, as people turn to it to obtain a synthetic USD due to the collapse of USDC
Read U.TODAY on
Google News
The recent crisis surrounding Circle’s USD Coin (USDC) stablecoin may have inadvertently strengthened Bitcoin, according to an analysis by Twitter user Byzantine General.
The analysis suggests that people have resorted to buying Bitcoin and shorting cross 1x inverse to obtain a synthetic USD, which has resulted in extreme negative funding because so many are doing it. Byzantine General believes that this trend could provide an incentive to pump the flagship cryptocurrency.
Some members of the crypto community have expressed skepticism about the Byzantine general’s analysis, arguing that current prices are mainly driven by panic buying and spot buying by people exiting the USDC. They claim that open interest is not growing and that the volume does not seem like an outlier. However, other members of the community see merit in the Byzantine general’s analysis, suggesting that the collapse of the USDC could cause a shift towards Bitcoin.
USDC, a key component of the cryptocurrency market and designed to maintain a stable value of $1 backed by cash and short-term government bonds, plunged below the intended $1-1 peg after its connection to the failed Silicon Valley Bank was revealed.
About $3.3 billion of the USDC’s reserves were tied to the bank, and the value fell to as low as 81.5 cents. Other less stable coins such as DAI and Pax Dollar have also come off their pegs, indicating a broader sense of anxiety.
In the absence of clarity about the return on deposits, the USDC has fallen below $1 and concerns about the wider implications of the Silicon Valley Bank’s collapse have spread. However, stablecoin Tether has so far remained stable at $1, despite previous scrutiny of its reserves.
Meanwhile, Bitcoin has been largely unaffected by the USDC crisis, with some crypto analysts suggesting that the crisis may actually be a boon for the crypto king as it drives investors towards the more established and stable cryptocurrency.
While the implications of the USDC crisis are not yet fully understood, some crypto experts believe that the crisis could have a positive effect on Bitcoin’s value. The Byzantine general’s analysis, while not universally accepted, provides an interesting perspective on the potential consequences of the USDC crisis.
