One of the most widely used crypto-dollars in Argentina has lost its parity with the American currency after a bank collapse

The stablecoin USD coin (USDC), one of the most used in Argentina and in the world, losing parity one by one with al American dollar and fell to a record low on Saturday after Circle, the US company that backs the currency, revealed that some of the reserves backing it were held in Bank of Silicon Valley. Also DAI and USDD, other cryptocurrencies that exist in the market, have moved away from their ankle with the dollar amid widespread fears.

the circle has $3.3 billion of its $40 billion in reserves to the collapse of Silicon Valley Bank, the company said in a tweet on Friday.

The cryptocurrency broke parity against the dollar and fell to $0.88 shortly after 11 a.m. in Buenos Aires on Saturday, according to CoinGecko. It rallied slightly to trade around $0.90 at press time.

Silicon Valley Bank collapsed on Friday in the biggest U.S. banking meltdown since the 2008 financial crisis, rocking global markets and locking up billions of dollars belonging to businesses and investors.

Circle said in a tweet on Friday that the company and USDC “continue to operate as normal” while the company awaits clarification on what will happen to depositors at Silicon Valley Bank.

Meanwhile, US cryptocurrency exchange Coinbase said in a tweet that it is not allowing the exchange of USDC for US dollars over the weekend while banks are closed, citing “the intensification of activity”. On Monday, this operation can be carried out.

Joseph Edwardsinvestment adviser to Enigma Securities, told Reuters the situation was “extremely dire” for USDC.

“No matter how strong Circle’s operations are, this type of peg loss on a stablecoin tends to fundamentally undermine confidence in it,” Edwards said.

“The short-term implications here are dramatic and unknowable, especially once systems begin to adjust to the reality that $1 is not yet trading for $1.”

Stablecoins are cryptocurrencies designed to maintain a constant exchange rate with “fiat” currencies – those backed by a central bank -, for example, via a 1:1 parity with the US dollar.

USD Coin is the second largest among these”crypto dollarswhich users use as a substitute for the US bill. The most important in the world is Attachedalso known as USDT.

USDT, primarily, has a wide reach among Argentinian investors and financial institutions that operate with dollars in the informal market. To a lesser extent, USDC – the currency that has seen problems today – has also been very well accepted in the local crypto market.

Attached resist so far. In fact, its price – which in theory should be stable – jumped above $1 this morning given the buying flow of investors dumping their USDC following the peg loss.

Those who did not resist the fears were AID there USDD. The first was created as an algorithmic stablecoin but, over time, it has become a hybrid since, in addition to automatically maintaining its parity with the dollar, it is now backed by reserves. USDD is Tron’s stablecoin and it also fell below $1 in what was contagion from the race against USDC.

Tether has a market capitalization of $72 billion, according to CoinGecko. After a massive outflow, USD Coin is approaching $25,000 million in capitalization.

The USDC price generally remains close to $1, so Saturday’s drop is unprecedented. According to data from CoinGecko, its previous all-time low was around $0.97 in 2018, although in 2022 it fell to just under $0.99 as cryptocurrency markets rallied. been rocked by the collapse of the Three Arrows Capital fund.

The CEO of crypto exchange Binance said in a tweet on Friday that he had no exposure to Silicon Valley Bank, as did Tether CEO Paolo Ardoino. Stablecoin issuer Paxos and cryptocurrency exchange Gemini also tweeted that they have no relationship with the bank.

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