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USDC When Stablecoins Aren’t So Stable: Inside the Depeg of 2023

Cryptocurrency Miners

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In March 2023, the crypto market was rocked by news of the USDC depeg, which caused significant losses for many traders and investors. Stablecoins, such as USDC, are digital assets designed to maintain a stable value by being pegged to a stable asset, such as the US dollar. The idea is to always have 1  worth $1 USD. They are essential in the crypto market as they provide traders and investors with a “safe haven” from the volatility of cryptocurrencies.



Breakdown of what USDC is backed by..

Here is a link to Circle’s monthly attestation reports:

As of writing this article, their most recent available is the Jan 31st, 2023 report.



Source: Circle’s Jan 2023 Attestation Report

US Treasury Securities: 33.6B
Cash held at U.S. banks: 8.7B

Total USDC Reserve Assets: 42.3B

Detailed in the report are the institutions they bank with: “Bank of New York Mellon, Citizens Trust Bank, Customers Bank, New York Community Bank, a division of Flagstar Bank, N.A., Signature Bank, Silicon Valley Bank (SVB) and Silvergate Bank.”

Funds held at SVB: 3.3B
Total USDC Reserve Assets: 42.3B

% Total of assets held at SVB: 7.8%

When Silicon Valley Bank (SVB), began collapsing due to regulatory and economic issues, instant fud was created in the market, making investors worried about USDC holding its peg (shown in the chart below). As a result,  lost its peg to the US dollar, and its value dropped significantly. The depeg caused losses for many crypto whales and investors, with some reportedly losing tens of millions of dollars.


Regulation, regulation regulation…

It’s worth noting that USDC’s reserve composition is subject to change, and Circle may adjust the composition of its reserves over time based on market conditions and risk management considerations. However, the above breakdown provides a general sense of what USDC is backed by and the approximate percentages of each type of asset in the reserves.

USDC depeg is a reminder of the importance of monitoring stablecoin stability and management to prevent future depegs. Stablecoins depeg for several reasons, including poor management of reserves, regulatory issues, or external factors such as market crashes or bank collapses. In the case of the  depeg, the collapse of SVB was the main contributing factor.

The collapse of SVB also raised concerns about the regulation of stablecoins. Stablecoins are not currently regulated in the same way as traditional currencies, which means they can be susceptible to market manipulation and other risks. The  depeg highlights the need for increased regulation and transparency in the stablecoin market.

Those who saw the opportunity..

Alameda Research, a crypto trading firm linked to billionaire Sam Bankman-Fried, reportedly sent $100 million of stablecoins to trading firms after the USDC depeg. The move was seen as a strategic move by Alameda to take advantage of the market volatility and make a profit. Alameda Research is known for its high-frequency trading strategies, and the  depeg provided the firm with an opportunity to profit from the market instability.

The USDC depeg also sparked controversy in the crypto community, with Justin Sun, the founder of Tron and BitTorrent, allegedly profiting from the depeg. A wallet linked to Sun reportedly made over $3 million from the USDC depeg, raising concerns about market manipulation and insider trading. The allegations against Sun highlight the risks associated with unregulated markets and the need for increased regulation and transparency.

Decentralized exchanges such as Curve Finance and Uniswap saw an increase in trading volumes after the USDC depeg. The depeg caused a surge in demand for stablecoins as traders and investors sought to protect their assets from the market volatility. The increase in trading volumes on decentralized exchanges highlights the importance of these platforms in the crypto market. Decentralized exchanges provide a safe and transparent way for traders and investors to buy and sell cryptocurrencies without the need for intermediaries.


In conclusion, the  depeg in March 2023 had a significant impact on the crypto market, causing losses for many traders and investors. The depeg serves as a reminder of the importance of monitoring stablecoin stability and management to prevent future depegs. While the USDC depeg caused panic and controversy, it also highlighted the importance of stablecoins and decentralized exchanges in the crypto market. The incident also raises concerns about the regulation of stablecoins and the need for increased transparency and oversight. The crypto market is still in its early stages, and incidents like the  depeg serve as valuable lessons for traders, investors, and regulators alike.

Additional USDC metrics…



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