What Happens with the USDC?
?Stablecoins like USDC are designed to maintain a 1:1 peg to USD, providing a stable store of value and a convenient way to move funds between different crypto exchanges and wallets. However, when a stablecoin loses its peg, it can cause confusion and uncertainty in the market.
Like USDC, one of the most popular stablecoins has been losing its peg to USD. This has caused concern among investors and traders and raised questions about the stability of the stablecoin market.
?What is USD Coin (USDC)?
USDC is a type of fiat-backed (fiat = government-issued money) stablecoin with its value pegged to the U.S. dollar. At any given time,?a single USDC can be redeemed for $1 U.S. dollar with the issuer.
What happened to USDC?
The price of USD Coin, which trades under the ticker USDC, lingered below $1, falling to $0.9850 on Friday evening in New York. Stablecoins like USD Coin are intended to maintain a 1-to-1 peg to highly liquid assets like the US dollar or euro.
?Technology Behind: USDC is based on Ethereum
USDC is built on the Ethereum blockchain and follows the?ERC-20 token standard, although it will be issued on other blockchains as well. Ethereum is a market-leading smart contract platform and a mainstay of the?DeFi movement. It enjoys strong support from developers and makes a solid foundation for USDC.
?How USDC is Redeemed
Redeemed through CENTRE members – Circle and Coinbase. You can exchange USD to USDC at a guaranteed 1:1 rate through Circle or Coinbase or through the market exchange rate,
?So why is USDC losing its peg?
Several factors are at play, including increased demand for USDC as a safe haven asset and regulatory pressure on stablecoin issuers to increase their reserves and maintain adequate collateralization. Whatever the cause the fact remains that a stablecoin losing its peg can have serious consequences for investors and traders.
?1.?????Fear that those reserves deposited with Silicon Valley Bank will be?lost forever.
Silvergate Bank?has formally entered liquidation after its big bet on ‘crypto’ turned up snake eyes, leaving other financial institutions second-guessing their own positions.
2.?????USDC redemptions in US dollars were based on the?Silvergate Exchange Network for 24/7 redemption (the proprietary 24/7 crypto settlement platform with digital asset exchanges and institutional investors). ?Since it is now inactive,?the redeems are limited to bank business hours.
3.?????This meant that?Coinbase remains the most reliable USDC-USD bridge for retail customers.
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What to do henceforth
Holding USDC or any other stable, it's important to monitor its value closely and be prepared to adjust your investment strategy if necessary. It's worth remembering that volatility and uncertainty are par for the course in the cryptocurrency markets. As with any investment, it's important to do your own research, diversify your portfolio, and only invest what you can afford to lose.
The cryptocurrency market is still in its early stages, and there will surely be bumps along the way. However, by staying informed and making smart investment decisions you can help ensure that you're well-positioned to capitalize on the opportunities ahead.