DeFi
DeFi Protocol Curve’s $500M stablecoin pool gets hammered as traders flee USDC
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Key infrastructure supporting stablecoin trading on decentralized finance (DeFi) exchange Curve is becoming unbalanced amid fears that 3pool’s triad of tokens could be affected by the sudden collapse of Silicon Valley Bank , a bank at the cutting edge of technology.
Curve 3pool, a liquidity pool with over $510 million in USDC, DAI, and USDT, is believed to hold roughly equal balances for all three. But at press time, USDT’s share had fallen to less than 7%, while USDC and DAI had climbed to over 46% each.
The imbalance reflects the sudden flight of crypto investors from assets linked to Circle’s USDC stablecoin; DAI is partially backed by USDC. Their fears are fueled by speculation that part of Circle’s cash reserves – the assets backing USDC – could be stuck in the bankrupt Silicon Valley Bank.
Circle has previously said it holds part of its $43 billion in reserves with Silicon Valley Bank. The tech lender’s deposits were seized by federal regulators on Friday after a run on the bank triggered its collapse. Silicon Valley Bank is the second largest bank to fail in U.S. history and the first since the 2008 financial crisis.
“Curve pools have become a proxy for investor sentiment toward stablecoins,” said Andrew Thurman, head of research at a data firm. Nansen. “They also play a key structural role in maintaining on-chain pegs, and an unbalanced pool can exacerbate liquidity issues, worsening panic.”
By the numbers, 3pool has never held such a small relative share of Tether’s USDT token as it does today, according to Dune Analytics. dashboard created by Subin An, data analyst for crypto fund Hashed.