USDC Temporarily Depegs on Binance Amidst Crypto Market Sell-Off
In an unexpected turn of events, Circle’s USDC stablecoin, which is typically pegged to the US dollar, briefly depegged from its $1 value on the Binance exchange. During a market-wide sell-off triggered by doubts surrounding the approval of a bitcoin ETF, USDC experienced three instances of price drops against its tether trading pair on Binance, reaching lows of $0.76, $0.803, and $0.80 before quickly recovering back to $1 each time.
Lack of Sufficient Liquidity and Market Depth Skew
The depegging of USDC on Binance is believed to be a result of inadequate liquidity when large sell orders were placed in exchange for USDT. Binance’s market depth for the USDC/USDT pair showed an imbalance towards the upside, indicating that any sell order exceeding the $6.1 million liquidity floor could push the price below its usual fluctuation of $0.98. Additionally, a significant liquidation of $500 million in derivative positions added to the instability, following speculation of the SEC’s rejection of bitcoin ETF applications.
Unusual Volatility for a Fiat-Backed Stablecoin
USDC’s volatility is noteworthy considering its usual stability as a fiat currency-backed stablecoin with a 1:1 ratio to the US dollar. These price drops can impact trust and perceived stability in the crypto market, although this incident seems to be contained. This isn’t the first time USDC has experienced a depeg, as it previously dropped to $0.877 due to the collapse of Silicon Valley Bank in March 2023, which was related to the bank holding a portion of USDC’s reserves.
USDC Depegging on Okx as well
Besides Binance, Okx also faced a depegging issue with USDC, though to a lesser extent, as its price dropped to $0.955. Interestingly, the depegging on Okx started earlier than on Binance and persisted for a longer duration.
Hot Take: Stability Concerns Arise as USDC Temporarily Depegs on Binance
Circle’s USDC stablecoin experienced a momentary depeg from its $1 value on the Binance exchange, dropping as low as $0.76. This unexpected event occurred amidst a crypto market sell-off and heightened skepticism surrounding the approval of a bitcoin ETF. The incident shed light on the importance of liquidity and market depth, revealing the vulnerability of stablecoins to significant price fluctuations. While the depegging was contained and USDC quickly recovered its pegged value, it raises concerns about trust and stability in the crypto market. Market participants will be closely monitoring the situation and taking steps to mitigate such risks in the future.
Benito Cormi, the brilliant crypto analyst who has made waves in the world of cryptocurrency. With his razor-sharp analytical skills and deep understanding of the digital asset landscape, Benito has become a trusted figure in the industry and remains at the forefront, tirelessly researching and analyzing market trends to help individuals and businesses make informed decisions in this dynamic landscape.