The recent crisis surrounding Circle's USD Coin (USDC) stablecoin may have inadvertently boosted Bitcoin, according to an analysis by Twitter user Byzantine General.
The analysis suggests that people have resorted to buying Bitcoin and shorting cross 1x inverse to achieve a synthetic USD, which has resulted in extreme negative funding because so many are doing it. Byzantine General believes that this trend may provide an incentive to pump the flagship cryptocurrency.
Some members of the crypto community have expressed skepticism about Byzantine General's analysis, arguing that current rates are mostly driven by panic buying and spot buying from people getting out of USDC. They claim that open interest is not growing and volume doesn't seem like outliers. However, other members of the community see merit in Byzantine General's analysis, suggesting that the collapse of the USDC may be causing a shift towards Bitcoin.USDC, a vital component of the cryptocurrency market and designed to maintain a steady $1 value backed by cash and short-term Treasuries, plunged below its intended 1-1 dollar peg after its connection to the failed Silicon Valley Bank was exposed.
About $3.3 billion of USDC's reserves were linked to the bank, and its value plummeted to as low as 81.5 cents. Other minor stablecoins like DAI and Pax Dollar have also slipped from their pegs, indicating a wider sense of anxiety.
In the absence of clarity about the return of deposits, USDC has fallen below $1, and concerns about the wider implications of Silicon Valley Bank's collapse have spread. However, stablecoin Tether has so far remained stable at $1, despite previous scrutiny over its reserves.
Meanwhile, Bitcoin has been largely unaffected by the USDC crisis, with some crypto analysts suggesting that the crisis may actually be a blessing in disguise for the crpyto king as it drives investors towards the more established and stable cryptocurrency.
While the implications of the USDC crisis are yet to be fully understood, some crypto experts believe that the crisis may have a positive effect on Bitcoin's value. Byzantine General's analysis, while not universally accepted, provides an interesting perspective on the potential consequences of the USDC crisis.