Here’s The Secret Math Behind The USDC Implosion – It Doesn’t Add Up

March 12, 2023

US Dollar Coin, the second most used stablecoin by market cap and meant to always remain priced at $1, fell into the higher 80’s on Friday March 10. However, overnight it began to recover. Here’s what happened and what we can expect:

USDC revealed that some $3.3 billion worth of the cash reserves that back USDC remain held at Silicon Valley Bank. This means that, absent that money, USDC is not 1:1 backed up with US dollars.

However, purely based on the analysis of SVB’s 2022 Annual Report (which you can find yourself at sec.gov). The following screen capture shows that SVC had $91b in long held maturities.

This image shows that they had about $16b in equity. 

The problem is that when forced to redeem those long held maturities early, the bank was under capitalized. That’s why the FDIC had to step in.

Yet, even after doing so, the FDIC should be able to liquidate SVB’s $188.4 billion assets (cash, AFS, discounted HTM, performing loans). This is 96% of all the $195.5 billion debt outstanding.

Can Circle cover the rest? Well, USDC has $33 billion in US Treasuries as well. The interest on their short term maturities is presently at 4.9% per annum. Taken over $33 billion, that equals $1.6 billion. That means they only need to recover $1.7b from SVB to remain solvent.

All these point’s suggest that the math doesn’t support an implosion. In fact, it suggests that there is a high chance that USDC will recover, because the $3.3 billion dollars trapped at SVB bank is likely to be returned.

If you found this helpful, Subscribe to The Art of the Bubble’s free newsletter.

Join us on Discord for live chat and daily updates. Find us on Twitter too.

You found this content helpful ?

  1. 1
    Join our free weekly "Bubble Bulletin" for more
  2. 2
    Join us on Discord for live chat and daily updates
  3. 3
    Follow us on Twitter
  4. 4
    Share this content using the buttons below :

Disclaimer

This piece of content is provided for educational and entertainment purposes only. Robin Technologies and Analytics LLC is the firm that distributes 1.2 Labs products. The firm does not provide individually tailored investment advice and does not take a subscriber’s or anyone’s personal circumstances into consideration when discussing investments; nor is Robin Technologies and Analytics LLC registered as an investment adviser or broker-dealer in any jurisdiction.

You should expect no financial returns one way or another based on statements contained herein. These points hold equally for any statements that could be attributed to The Art of The Bubble or any related business entities or personnel operating in association with Robin Technologies and Analytics LLC.

If you decide to buy or invest in anything, then your returns and potential losses are your own. No statements about taxation are taxable advice and you are encouraged to consult your own tax professional. You are also encouraged to do your own due diligence before investing in anything.

RELATED POSTS:

March 25, 2024

June 27, 2022

October 24, 2022

March 21, 2023

April 25, 2023

April 17, 2024

March 28, 2023

April 2, 2024

February 9, 2023

LATEST POSTS:

April 18, 2024

April 17, 2024

April 16, 2024

April 15, 2024

April 11, 2024

April 10, 2024

April 9, 2024

April 8, 2024

April 4, 2024

What do do now?

Join the free 1.2 Labs "Bubble Trading" Bulletin for new trading strategies, macro & sentiment analysis and occasional free airdrops