An example of such an event is the news that Circle couldn’t withdraw its $3.3 billion from Silicon Valley Bank. Notably, the bank was shut down by the California Department of Financial Protection and Innovation.
As the news broke, massive selloffs followed, causing an unlucky investor to lose deeply in a failed transaction.
Deep Loss For Crypto Investors
The issue started when crypto firm Circle announced it hadn’t received a wire transfer of $3.3 billion from Silicon Valley Bank. As soon as the announcement went out, many USDC investors panicked and started withdrawing. As a result, the USDC stablecoin depegged from the US dollar.
While some investors were fast enough to exchange their USDC for USDT, an investor wasn’t so lucky. In a Twitter post shared by BowTiedPickle, the investor made a $2 million payment but received $0.05 USDT.
After digging into the matter, BowTiedPickle discovered that the investor used KyberSwap aggregation router to dump “a large clip of 3CRV (DAI/USDC/USDT) LP token into USDT”. The user stored the crypto stablecoin in a liquidity pool which he could have sold for USDT for a 6% slippage. But as BowTiedPickle disclosed above, he chose a shady method.
Due to the rush, the investor forgot to set a slippage which would have allowed him to set the price for his transaction to go through. This resulted from human error, causing a permanent loss of funds.
Brief On USDC Saga
USDC is the second largest stablecoin in the market after USDT. At the time of writing, the stablecoin has lost its peg on USD. It currently stands at $0.9169 and has lost 13.68% of its market cap.
USDC issue started when Circle shared its latest audit disclosing that as of January 31, 20% or $8.6 billion of its reserves are in different financial institutions, including Silvergate, which crashed and shuttered Silicon Valley Bank.
To be transparent to its customers, Circle announced its difficulty in withdrawing $3.3 billion of its $40 billion of USDC reserves in SVB. It also revealed that it joins other SVB depositors and customers to call for its continuity.
1/ Following the confirmation at the end of today that the wires initiated on Thursday to remove balances were not yet processed, $3.3 billion of the ~$40 billion of USDC reserves remain at SVB.
— Circle (@circle) March 11, 2023
Unfortunately, the announcement yielded negative results as panic set in, causing many investors to withdraw. Moreover, crypto exchanges like Coinbase and Binance paused USDC conversions 30 minutes after the announcement, further exacerbating the situation.
Featured image from Pixabay and chart from Tradingview.com