USDC had a tough March when the US banking authorities intervened to take over Silicon Valley Bank (SVB). Furthermore, the loss of crypto-friendly banks has led in a decrease in the capitalization of Circle's stablecoin.
Circle, the issuer of USDC, announced that about $3.3 billion in cash reserves backing USDC are still held at Silicon Valley Bank, which was closed down by California banking authorities following a bank run.
Other, smaller-circulation stablecoins, such as BUSD issued by Paxos and crypto-backed stablecoin DAI produced by MakerDAO, also lost their pegs. Only USDT appears to benefit from the instability, briefly topping $1, most likely as a result of investors abandoning the depegged stablecoins.
The crypto market has recovered dramatically in the weeks following the losses of several US banks as well as the Credit Suisse disaster, but the same cannot be said for USDC.
Circle issued $600 million in USDC and redeemed $2.5 billion in USDC in the last 7 days, based upon official data, while circulation declined by around $1.9 billion.
As of March 30, the entire circulation of USDC was $32.6 billion, while the reserve was $32.8 billion, consisting of $4.4 billion in cash and $28.4 billion in short-term US treasury bonds.
However, the DeFi market has not suffered as a result. On March 11, Uniswap had $13.3 billion in volume, while Coinbase had $1.7 billion. This is what distinguishes DeFi platforms, which keep financial risk issues centralized.
There is also growing interest in researching potential remedies to stablecoin issues. Although USDC is still trading at the "stable" $1 peg, the reduction in circulation indicates that money has transferred to competing stablecoins such as USDT.