In The Midst Of Silvergate's Exodus, Investors Shore Up Stablecoins

Due to the collapse of cryptocurrency-friendly bank Silvergate Capital Inc., investors are increasing the circulation of stablecoins even as the overall cryptocurrency market experiences a dip.

‍

The two most valuable stablecoins in the market, USDT from Tether and USDC from Circle, saw an increase in activity on Friday morning in India. According to pricing information from CoinGecko, the 24-hour trading volume for USDT on March 3 was $43.2 billion, up from $39.9 billion for the entire day before, while USDC volumes increased to $4 billion from $3.4 billion.

‍

Aiming to maintain a 1:1 value with a less erratic asset, usually the US dollar, stablecoins are digital tokens. Most companies do this by keeping sizable reserves of cash and cash equivalents as collateral, so theoretically investors may always exchange their stablecoins for dollars at cryptocurrency exchanges or directly with the token's creator.

‍

According to the data, the market capitalizations of USDT and USDC, which represent the number of tokens in circulation, rose by $22 million and $589 million, respectively, in the same time frame.

‍

According to Markus Thielen, head of research at Matrixport, "we have witnessed a surge in stablecoin activity as a hint that crypto businesses are leveraging crypto rails to move money around. He claimed that the increasing activity shows that cryptocurrency traders are hesitant to clear through Silvergate's Exchange Network, also known as SEN, and may be substituting digital assets for conventional finance.

‍

The US-based Silvergate Capital Corp. announced on Wednesday that its auditors need additional time to evaluate the company's position as a "going concern," which led to a record-low share price on Thursday. Nevertheless, starting of Thursday, many digital-asset exchanges, stablecoin issuers, and trading desks are no longer receiving or initiating payments through Silvergate. The bank's Facility is one of the few locations in the US that can handle the real-time movement of funds between crypto businesses.

‍

Further intraday data from CryptoQuant showed that during the same time period on Friday, stablecoin reserves on exchanges were also rising. On March 3 compared to the previous day, stablecoin reserves grew by 120 million tokens across all exchanges, showing that traders and businesses are putting more of their cash in digital assets on exchanges as a safe haven during the unrest.