FDIC relief SVB contagion by paying out SVB depositors on Monday. But we still need to consider bank are a risk to fiat-backed stablecoins
Silicon Valley Bank (SVB), a crypto-friendly bank that was hit badly by liquidity and result in major cryptocurrency falling for some days now. However, an hours before the trading day will start in Asia, the Federal Deposit Insurance Corporation (FDIC) come for relief to stop the contagion and the effect on the crypto market.
Amid of SVB crisis the USDC Stablecoin pegged to the US dollar which is widely used for trading in cryptocurrency market depegged and has caused lot of fears in crypto space. Over $2 billion of USDC was withdrawn by customers for short periods of time and some been trade to another coin, many of large investors like Huobi who have $100,000,000 of USDC trade it for other coin. At time the USDC depegged, bitcoin drop 8% from $24k back to $20,000 and other major cryptocurrency suffered for the losses. However, as FDIC stoodup amid of SVB crisis has led investors and USDC holder a sigh of relief.
The FDIC took control of SVB crisis on Friday and made announcement to provide stability to the market and agreed to pay SVB deposits on Monday after customers withdraw billion from the lender under 24 hours, to stop the contagion effect on the market and help the bank meet their depositors needs .
This is really a good news for USDC holder, in fact it's a good news for the whole market because after this stoodup the market started gaining a strength, at time of writing Bitcoin is 7% up at $22,400 ethereum $1,600 and Hive hovering around 36 cent.
But some said FDIC payout amid SVB crisis will not take an effect for long-term, why?
Truely FDIC are trying to support America business and household with this action, because many of business in California are customers of SVB, so SVB collapse will take a bad effect on the financial economy in US. Therefore FDIC action is to help to protect the economy, help people to gain confidence in the banking system and help recovered the loses not to turn everything upside down like Terra that collapse in 2022 and affect growth of business in U.S
But my believe is that crypto market will remain volatile. Even with one year loan offering by FDIC to keep SVB meet depositors need and not fall into collapse, the future is not certain if bank are still fiat-backed of stablecoins, the cryptocurrency market will still remain suffering time to time.
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The CEO of Binance crypto exchange also said it that bank are a risk to fiat-backed stablecoins and we will continue experience this kind of down if exchanges don't stop using bank to backed their stablecoin.
Although the market may continue to experience ups and downs due to security scrutiny lately on crypto exchanges, but to avoid any problem in the future I think bank should be stay aside from crypto industry.
USDC rebounded from its lows and reclaim its peg of $1 on Sunday, I think that relief investors and the market.
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