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00:00.0
Someone asked me, what do I think will happen to the USDC, the stablecoin issued by Circle now that Silicon Valley Bank or SVB has recently collapsed?
00:12.0
Now, for those that don't know, USDC is a stablecoin that is a cryptocurrency pegged to the US dollar that's issued by Circle and Coinbase.
00:22.0
Now, since it's a stablecoin and it's pegged to the US dollar, that means it's one-to-one with the US dollar.
00:28.0
Now, what would happen if their dollar reserves held by various banks suddenly got liquidated?
00:36.0
Which is what happened with their dollar reserves that is deposited with Silicon Valley Bank or SVB.
00:44.0
They have 3.3 billion dollars deposited with SVB and now that SVB has collapsed, no one knows if Circle will be able to get their deposit of 3.3 billion dollars back.
00:58.0
And because of this panic, people are now selling their USDCs on the open market, collapsing the price of USDC and de-pegging it from the US dollar.
01:08.0
So instead of one-to-one, it's dropped to as low as 87 cents to the US dollar.
01:13.0
This is alarming. Now, people are wondering, will USDC have the same fate as the Tera USD or will it be able to survive this fiasco?
01:22.0
So here's my take on it. USDC has a market cap of about 41 billion dollars and within the last 48 hours has collapsed to about 38 billion dollars.
01:33.0
That's a 3 billion dollar drop in market cap or market value.
01:37.0
And the problem right now is we don't know if it's going to keep collapsing or if it's going to be able to survive this.
01:42.0
So what I did is I took a look at a little bit of what its finances look like to be able to determine if I think it'll survive this or not.
01:49.0
So the first thing I noticed is that it has 9 billion dollars deposited in different banks including SVB.
01:55.0
Now, 3.3 billion of the 9 billion is in SVB and that's where we have a problem.
02:00.0
With the FDIC coming in, I do believe that Circle will be able to recover some, if not majority of their 3.3 billion dollars.
02:10.0
Because it is in the best interest of the federal government to be able to give back all of the depositor's money or at least most of it.
02:17.0
Because if they don't do that, I guarantee you that what happened with SVB is going to happen in other banks.
02:24.0
People are going to lose confidence in banks and they're going to start withdrawing their money from the different banks all across the United States and even the world.
02:32.0
Now, when I looked at the audit of Circle's USDC, it looks like they have about 34 billion dollars of their reserves in U.S. Treasuries.
02:41.0
This is actually comforting because U.S. Treasuries are one of the safest investments companies can make because of the fact that it's guaranteed by the U.S. government.
02:51.0
So if in any case that people would want to withdraw their USDC and convert it to U.S. dollars or whatever they want to convert it to, Circle should have enough to be able to accommodate all the withdrawals if ever that happens.
03:02.0
I think the worst case that could happen is if every single person in the world wants to get rid of their USDC and convert it to U.S. dollars, then that could be problematic for Circle.
03:12.0
But the probability of 100% of all USDC holders wanting to get rid of their USDC is highly unlikely.
03:19.0
Therefore, I think Circle has a chance of surviving this current challenge of theirs.
03:23.0
But anything can happen and as of the making of this video, Circle has announced that they are holding all withdrawals because banks are closed and will resume all withdrawals when banks open first thing on Monday.
03:35.0
Now, let's see what's going to happen and if Circle's going to be able to fulfill all of the withdrawals that are going to be happening during the week.
03:41.0
If they're going to be able to survive that, they should be okay.
03:44.0
And it seems to me that they're going to allow anyone and everyone that wants to withdraw their USDCs and convert it to U.S. dollars with no issue whatsoever.
03:53.0
So will USDC survive or go the same way as Tera USDT? Only time can tell.
03:58.0
But with the USDC de-pegging from the U.S. dollar, it is a little bit concerning.
04:03.0
But from my perspective and opinion, I think USDC has a good chance of surviving this.
04:07.0
By the way, everything I'm saying to you is just my opinion and this is not meant to be financial advice.
04:12.0
And please do your own research and make your own decisions that's best for you.
04:16.0
So I hope that answers your question on what will happen to the USDC.
04:20.0
And if you like my content, please subscribe to my YouTube channel by clicking on the subscribe button and click on the notification bell so you're notified of my latest videos.
04:27.0
Thanks so much, guys. I'll see you guys on the next video.
