USDC loses peg to the dollar

March 10, 2023

USDC loses peg to the dollar

The major stablecoin USDC lost its peg to the US dollar on March 10. Earlier that day, the collapse of the Silicon Valley Bank sent shockwaves through the financial system, and some in crypto were concerned about possible contagion to crypto companies. In particular, it was known that some of Circle's cash reserves backing USDC were stored at SVB, but it wasn't clear quite how much. After some delay, Circle disclosed that $3.3 billion of their roughly $10 billion in cash reserves were stored with SVB.

That evening, Coinbase announced they would be pausing USDC redemptions for dollars until the following Monday, claiming it was only because in times of high volume, they needed to process transfers via the traditional banking system. Despite their stated reason, this deepened fears about the stability of USDC, which is supported in part by Coinbase.

The price of USDC began to wobble on smaller, less liquid exchanges like Gemini and Kraken before the issue was reflected more widely. However, most exchanges were showing USDC trading at prices between $0.90 and $0.98 later that night — a noticeable departure from USDC's normally fairly steady peg.

A sustained de-peg would wreak havoc on the crypto industry, where USDC is the second largest stablecoin and boasted a $43 billion market cap (at least before substantial outflows surrounding the SVB concern). Other stablecoins even have exposure to USDC, with both FRAX and DAI using USDC for significant portions of their collateral.

March 10, 2023

Someone attempting to swap ~$2 million in 3CRV token ends up with $0.05 due to apparent Kyber issue

(attribution)

Someone tried to swap around 2.03 million 3CRV tokens (priced at around $1.97 million) for stablecoins using the KyberSwap decentralized exchange protocol. However, due to an apparent flaw in which the protocol routed the trade through a project with very little liquidity. The trade suffered from massive slippage, and was frontrun by an MEV bot. The MEV bot made off with a nice $34,400, and the trader wound up with only five cents in the Tether stablecoin.

Kyber seemed to acknowledge that the issue was on their end, tweeting that "We have been in touch with him and are investigating the issue. We will provide an update soon."

Tweet by Spreekaway

March 10, 2023

Coinbase pauses redemptions of USDC for dollars

(attribution)

The collapse of the Silicon Valley Bank on March 10 led to concerns over the stability of the stablecoin USDC, after it was revealed that a portion (later specified at $3.3 billion) of its cash reserves were kept with SVB. This led to somewhat of a run on USDC, which began wobbling from its dollar peg down to as low as $0.95 on some exchanges.

On the evening of the tenth, Coinbase announced that they would be "temporarily pausing USDC:USD conversions over the weekend while banks are closed," stating that "during periods of heightened activity, conversions rely on USD transfers from the banks that clear during normal banking hours".

"Your assets remain safe & available for on-chain sends," they said: cold comfort for those who are afraid their USDC may not be worth $1 come Monday.

Coinbase is one of the firms behind USDC, and its decision to stop processing redemptions is likely to add to the concern over the stablecoin's... stability.

Tweet by Coinbase

March 10, 2023

Bankrupt BlockFi has at least $227 million at collapsed Silicon Valley Bank

(attribution)

BlockFi, which has been in bankruptcy since shortly after the November FTX collapse, appears to have exposure to the collapsed Silicon Valley Bank. According to a court filing, approximately $227 million in BlockFi funds has been kept in one of several accounts the company maintained at Silicon Valley Bank. The account is a money market mutual fund, meaning it is not FDIC insured.

The US Trustee reportedly warned BlockFi counsel on March 6 that the company needed to "immediately take steps to safeguard these funds in compliance with" the depository agreement, because a MMMF was not in compliance. BlockFi responded that the account was FDIC insured (up to the FDIC's $250,000 limit), but the Trustee maintains that that is not accurate.

"BlockFi has $227 million in uninsured funds in Silicon Valley Bank", The Block
Motion, In re: BlockFi

March 10, 2023

Silicon Valley Bank collapse causes crypto contagion concerns

(attribution)

Although it doesn't seem that it was exposure to the crypto industry that did in Silicon Valley Bank (unlike with fellow failed bank Silvergate), the crypto industry has been showing signs of concern that SVB's collapse may impact crypto businesses. In particular, there are fears around the fact that Circle, the company that backs the major USDC stablecoin, kept some of its cash reserves with SVB. Circle disclosed that around $3.3 billion, or around one-third of USDC's $9.88 billion in cash reserves backing USDC, was kept with Silicon Valley Bank.

SVB was also the preferred bank for various giants in the crypto VC world, including Andreessen Horowitz and Sequoia Capital. Pantera Capital also used SVB as a custodian.

March 10, 2023

Huobi Token flash crashes by 90%

(attribution)

Huobi Token, the token tied to the Huobi cryptocurrency exchange, experienced a flash crash in which the token price tumbled 90% from $4.60 to around $0.31 within about a ten-minute span. HT does not have a ton of liquidity, and so Huobi-linked executive Justin Sun reported that a "few users trigger[ed] a cascade of forced liquidations in the spot and HT contract markets".

Sun also announced that he had transferred $100 million to Huobi to provide more liquidity. He also announced that "Huobi will bear all leverage-through position losses on the platform resulted from this market volatility event of HT."

Although the token recovered quickly, the flash crash sparked rumors that Huobi was insolvent.

"Huobi Token Plunges 90% In Minutes, Sparks Insolvency Rumors", Bitcoinist
"Huobi Token Flash Crashes by 90% in Minutes: Here’s Everything You Need to Know", CryptoPotato

March 9, 2023

Blockchain.com shutters asset management arm

(attribution)

After launching an asset management business less than a year ago, Blockchain.com has announced they will be shuttering it. They blamed the ongoing "crypto winter" as contributing to the decision. The UK-based firm had planned to offer "algorithm-based risk-managed exposure" to Bitcoin, which may have proven challenging in a year of declining Bitcoin prices.

"Blockchain.com to Sunset London-Based Crypto Asset Management Arm", Bloomberg

March 9, 2023

New York Attorney General sues KuCoin, claims ETH is a security

(attribution)

New York Attorney General Letitia James announced a lawsuit against the Seychelles-based KuCoin crypto exchange, after finding that users could trade on the exchange despite it not being registered in the state.

The NYAG took the additional step of alleging that ETH is a security. Many have argued that Bitcoin and ETH, the native token of Ethereum, are not securities because they are "sufficiently decentralized". The NYAG, however, wrote in the press release announcing the lawsuit that, "This action is one of the first times a regulator is claiming in court that ETH, one of the largest cryptocurrencies available, is a security. The petition argues that ETH, just like LUNA and UST, is a speculative asset that relies on the efforts of third-party developers in order to provide profit to the holders of ETH."

The NYAG is also going after KuCoin for offering a lending and staking product, a category of product that has recently been a focus of various enforcement actions. They claim that KuCoin did not comply with a subpoena.

"Attorney General James Continues Crackdown on Unregistered Cryptocurrency Platforms", press release

March 9, 2023

Hedera Network halts access after exploit

(attribution)

The Hedera network turned off access to the Hedera mainnet on March 9 after observing "smart contract irregularities". They subsequently confirmed that the Hedera smart contract service had been attacked by exploiters who were able to transfer individual users' tokens to their own accounts. Some individuals using cold wallets even claimed their tokens had been stolen.

Hedera has not disclosed how much had been stolen. Total value locked (TVL) on the network dropped 33% from $36.1 million to $24.6 million.

Some balked at Hedera's ability to simply turn off user access to the network, despite claiming to be a decentralized project.

March 8, 2023

Turkish electric vehicle company Togg announces presale via NFT, then scraps the plan after customers have already bought in

Rendering of a red SUV-style car, with text below it reading, "NFT'nizi seçmeye hazır mısınız?"

Promotional image for Togg's NFT collection, captioned "Ready to choose your NFT?" (attribution)

Turkish electric vehicle startup Togg announced that interested customers would be able to buy obtain pre-order rights for the limited run of their "100 Year Special Series" cars if they purchased one of the 2023 NFTs they planned to mint on the Avalanche blockchain. Based on rarity, NFTs began minting at between 10 and 30 AVAX ($200-$600) depending on rarity, which prospective customers purchased at its ~$20 price in anticipation of the early February sale. Many customers purchased considerably more AVAX, anticipating fierce bidding wars.

However, shortly after the NFT sales began, the platform crashed. Then, very soon after the sale began and Togg began addressing the issues with the platform, a series of earthquakes devastated portions of Turkey. As a result, Togg announced they would be postponing the sale until a later announcement.

On March 8, Togg announced that they had canceled their plans to conduct the pre-order process by NFT drawing, and that any NFT holders would not be prioritized in the pre-order.

This infuriated some customers who had purchased AVAX solely intending to use it to obtain a pre-order slot — particularly because AVAX is now priced below $15, meaning those who've been holding AVAX since purchasing it have lost 25%.

"Togg to sell pre-order rights with NFTs", Hurriyet Daily News
Tweet by Togg

No JavaScript? That's cool too! Check out the Web 1.0 version of the site to see more entries.