The world of cryptocurrency is known for its volatility, with prices rising and falling on a regular basis. However, the recent collapse of the USDC stablecoin has caused investors to fear that the entire market could be on the verge of a catastrophic crash. Though several analysts assure a rebound for the crypto market soon, the rising FUD situation is forcing investors to liquidate their holdings to avoid any massive loss.
USDC’s Dramatic Fall Sends Shockwaves Through Crypto Industry
Following a significant sell-off, the global crypto market experienced a widespread rebound on Saturday morning, with Bitcoin and Ethereum prices increasing by 5% and 6%, respectively. Nonetheless, top stablecoins USDC, DAI, and USDD saw significant depegging, attributed to the lingering effects of the Silicon Valley Bank crisis on the crypto market.
Amid a tumultuous week for cryptocurrencies, the loss of its U.S. dollar peg by Circle’s $43 billion USDC stablecoin has left Bitcoin, Ethereum, and other major cryptocurrencies preparing for significant volatility. For the first time since November, the total market capitalization of cryptocurrencies fell below $920 billion, and within the past 24 hours, over $200 million in futures tied to cryptocurrency were liquidated.
Even though the USDC’s price has lost value, some traders are wagering on a slow rebound towards the $1 mark by purchasing USDC at a lower price, which could result in a potential 10% profit if USDC reaches its dollar peg.
Market experts believe that USDC will soon gain the $1 mark as Circle has five more banks for its cash reserves, and its $3.3 billion exposure out of $40 billion will not affect the USDC much. However, leading assets like Bitcoin and Ethereum are currently experiencing a short squeeze, with massive funds being poured in the last 24 hours.
If USDC continues to decline, it may lead to a significant downward trend for the price of Bitcoin, given that the average funding rates have reached their most negative point since the FTX incident in November 2022. If Bitcoin opens a daily candle below the $19.5K level, it may initiate a death rally in the market, plunging several assets to December levels.
This week, the price of Bitcoin has declined by 10% following the collapse of the crypto-friendly Silvergate Bank. As a result, the combined crypto market has lost $100 billion, and the prices of the top ten cryptocurrencies, such as Ethereum, BNB, XRP, Cardano, Dogecoin, Polygon, and Solana, have all experienced significant drops.
In addition, the forthcoming CPI data could potentially trigger a sharp decline in the crypto market, especially if the data leads to a 50-basis point rate hike, which would result in an extended bearish trend for numerous assets.
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Shayan is a digital nomad and a professional journalist. He delivers high-quality engaging articles to Coinpedia through his in-depth research and analysis.
The recent collapse of USDC, a major stablecoin, has raised questions about its impact on the crypto market and whether it will cause a crash. In this article, we look at how the events might affect the prices of top crypto assets and what to expect moving forward.
The fall of USDC began when several leading crypto exchanges delisted the stablecoin due to conflicting reports about its financial stability. While the exact details are still unclear, it does not look good for crypto as investors become more cautious about investing in the space.
In the near term, the crypto market could experience some short-term volatility as investors re-evaluate the safety of the crypto space and the reliability of stablecoins. Prices of major tokens such as Bitcoin and Ethereum could be affected and might even face a slight dip in value. However, given their long-term potential, it’s likely that the prices of these two major tokens will recover and remain stable.
For altcoins, the news of USDC’s collapse could have a more lasting impact as investors move away from riskier investments and focus on safer ones. Popular altcoins such as Dogecoin and LINK could see their prices drop significantly due to this action. It’s also possible that investors may choose not to include these tokens in their portfolios.
The events of the past week should provide further insight into the direction of the crypto market and how the USDC collapse might affect it. In the meantime, it’s important for investors to keep a close eye on the news and be prepared to make changes to their portfolios if needed. With careful monitoring, investors should be able to make the best decisions for their investments moving forward.