Market Analysis Report (13 Mar 2023)

The second-largest stablecoin, USDC, lost its peg to the U.S. dollar over the weekend after it was revealed part of the stablecoins’ reserves were at Silicon Valley Bank. The peg has now nearly been restored  after US regulators announced measures to safeguard all depositors at Silicon Valley Bank and Signature Bank after their recent closures.

Decentralized exchanges (DEXs) Uniswap and Curve both recorded lifetime high trading volumes over the weekend as leading stablecoins USDT, USDC, and DAI lost their peg to the US dollar, with the former going above $1, and the other two going below it.

Leading cryptocurrency trading platform Binance has said it converted $1 billion worth of its stablecoin, BinanceUSD (BUSD), into other major digital assets, including BTC, ETH, and BNB to support the market.

 Top stories in the Crypto Roundup today:

• USDC Nearly Restores Peg After Treasury Department Says SVB Depositors Will Be Made Whole
• DEXs See Record High Trading Volumes as Stablecoins Depeg
• Binance Converts $1 Billion of BUSD into BTC, ETH, BNB, and Others
• CME Futures Volumes Rise 21.2% Month on Month

USDC Nearly Restores Peg After Treasury Department Says SBB Depositors Will Be Made Whole

The second-largest stablecoin, USDC, lost its peg to the U.S. dollar over the weekend after it was revealed part of the stablecoin’s reserves were at Silicon Valley Bank. The peg has now nearly been restored after US regulators announced measures to safeguard all depositors at Silicon Valley Bank and Signature Bank after their recent closures.

Regulators in the US have ensured full protection for depositors at Silicon Valley Bank after it was closed last week and placed under the control of the Federal Deposit Insurance Corporation (FDIC).

A joint statement, by the US Treasury Department, the Federal Reserve, and the FDIC reads:

“Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law. Finally, the Federal Reserve Board on Sunday announced it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors.“

Per the statement, shareholders and unsecured debtholders won’t be protected, while senior management at both Silicon Valley Bank and Signature Bank has been removed.

Depositors are set to have access to all their money from today, March 13, with no losses associated with the resolution of the banks being borne by taxpayers. $3.3 billion of USDC’s reserves were kept at Silicon Valley Bank.

Over the weekend, USDC lost its peg to the US dollar, as the crisis was heightened by a Coinbase announcement saying USDC conversions to USD wouldn’t be processed over the weekend.

Since regulators stepped in USDC has been recovering its peg, going from a low below the $0.90 mark to around $0.99 at the time of writing.

DEXs See Record High Trading Volumes as Stablecoins Depeg

Decentralized exchanges (DEXs) Uniswap and Curve both recorded lifetime high trading volumes over the weekend as leading stablecoins USDT, USDC, and DAI lost their peg to the US dollar, with the former going above $1, and the other two going below it.

Decentralized exchanges rely on smart contracts instead of middlemen to provide financial services to users. Users deposit their tokens to pools to provide liquidity to the platform for rewards, which are typically a cut of fees paid by traders who use these services.

Data shows that USDC pools for Wrapped Ether (WETH), USDT, and DAI processed $15 billion in volume over a seven-day period, with a majority of this taking place from Friday to Sunday.

Elsewhere, stablecoin swapping tool Curve recorded nearly $8 billion in trading volume. One of its popular pools was imbalanced as traders rushed to exchange USDC for other tokens.

Binance Converts $1 Billion of BUSD into BTC, ETH, BNB, and Others

Leading cryptocurrency trading platform Binance has said it converted $1 billion worth of its stablecoin, BinanceUSD (BUSD), into other major digital assets including BTC, ETH, and BNB to support the market.

The price of Bitcoin surged above $22,500 over Asian trading hours as the week started, with ETH moving past $1,600, likely due to buying pressure associated with Binance’s conversion. BNB also rose over 10% to trade above $300.

The crypto market has, however, endured another setback shortly after the move as US regulators shut down Signature Bank, a crypto-friendly bank, adding further stress to the market and leading to a correction in prices.

CME Futures Volumes Rise 21.2% Month on Month

In February, CME futures volumes experienced a 21.2% increase compared to the previous month. The trading volume for CME’s ETH futures was $10.1 billion, marking a 24.4% increase from January, while the trading volume for CME’s BTC futures was $25 billion, showing a 20% increase.

When combining ETH and BTC futures volumes, the total rose by 21.2% to reach $35 billion, excluding Micro Futures.

The highest trading volume for BTC and ETH futures in February was recorded on the 21st, with a combined volume of $4.05 billion. This represents a 25.1% increase from the highest trading volume in January.

Learn more about the state of exchanges via CryptoCompare’s latest Exchange Review report.

State of the Crypto by Top Tier Exchange Volume

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