Crypto wallets withdraw $902M USDC from centralized exchanges in last 24 hours amid SVB, Silvergate shutdowns
The shutdown of two federally insured members of the Federal Reserve System – Silicon Valley Bank and Silvergate Bank – is causing ripple effects in the crypto ecosystem, and many are now looking at how these two events will affect Circle, the payment services company that operates the stablecoin USDC.
As the adjacent crypto banks close, some in the crypto space have highlighted how a significant portion of USDC reserves are stuck in cash in the reserve banks. Deloitte’s accountants’ report for Circle, published March 2, indicated that Circle held cash at the following banks as of January 2023: Bank of New York Mellon; Citizens Trust Bank; Customers Bank; New York Community Bank, a division of Flagstar Bank, NA; Signature Bank; Silicon Valley Bank and Silvergate Bank.
According to Circle’s transparency page, $43.1 billion USDC is in circulation, with $43.2 billion in reserves; $11.4 billion, or 26% of all USDC reserves, are held in cash at reserve banks such as Silicon Valley and Silvergate.
Circle has since moved some of its USDC reserve deposits out of Silvergate and into other banking partners, as indicated in a company update on March 4, but Circle has not been the only one adjusting to the shutdown of two members of the Federal Reserve System.
USDC is the token in the last 24 hours with the largest negative net flows from centralized exchanges among three parties: All smart money wallets, all funds and market makers, and all wallets, according to chain data from blockchain analytics firm Nansen.
Nansen considers a wallet to be “smart money” if it meets at least one of several criteria such as earning more than $100,000 by being a liquidity provider/miner on Uniswap and making multiple profitable trades on a decentralized exchange (DEX) in a single transaction , through mechanisms called flash loans.
In the last 24 hours, all smart money wallets had an outflow of $68 million in USDC from centralized exchanges. Nansen-branded funds and market maker addresses, which include Genesis Trading, Wintermute and Jump Trading, withdrew $79 million. All wallets had a combined outflow of approximately $902 million from centralized exchanges. (Genesis Trading, like CoinDesk, is owned by Digital Currency Group.)
Over the past seven days, $3 billion in USDC has been withdrawn from centralized exchanges as of press time.
Charles Storry, head of growth at crypto index platform Phuture, said in a private Telegram message to CoinDesk that “people are preparing for a worse case [sic] scenario,” noting that “people are moving into more distrustful [stable] assets.”
Per Nansen, wallets with the highest USDC balances belong to Binance, MakerDAO, Arbitrum, Polygon, Crypto.com, Voyager, Aave, Optimism, dYdX and Compound, showing how large entities in the crypto space rely on USDC to hold value.
