Circle Eliminates Nearly All Of USDC’s Backlog

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Investors fled after Circle-issued USDC’s inability to maintain its peg to the US dollar three days prior.

According to Messari data, Circle has taken around 3.9 billion USDC out of circulation since last Friday, bringing the total amount in circulation to 39.5 billion USDC. Circle continues to produce new coins that are added to the circulation, but far less than it did previously. The stablecoin issuer’s connections to the troubled Silicon Valley Bank (SVB) became known, and it appeared as though the banking sector was on the verge of collapse. This is when the supply of USDC began to decline. 

Circle Clears All Backlogs 

Circle said on Friday that SVB was a lien on $3.3 billion of its reserves. On the Kraken exchange early on Saturday, its value versus the dollar plummeted to 87 cents, a significant decline from the point at which the collapse of the crypto exchange FTX drove markets into meltdown. With the restoration of USDC’s peg, Circle declared that it will transfer the reserves to BNY Mellon.

The USDC-U.S. dollar trading pairings on centralized exchanges (CEX), which provide real-time conversion rates into the dollar, boosted the daily transaction volume to an all-time high of $600 million on Saturday, according to a study from crypto analytics company Kaiko. In contrast, the daily average transaction volume in the previous week varied between $20 million and $40 million.

A larger portion of the deals has been made on CEXs, which “could not handle the inflow in sell volume, causing USDC’s exchange rate to collapse,” according to Kaiko.

When traders hurried to convert USDC for ether (ETH) and tether over the weekend, decentralized exchanges (DEX) Uniswap and Curve handled record-high trade volumes (USDT). According to Kaiko’s assessment, Curve and Uniswap version 3 processed almost $6 billion in volume for the USDC-USDT pairing.