The Weekend USDC Fell to 87 Cents
Why USDC fell sharply in March 2023, how Silicon Valley Bank was involved, and what brought its price back to one dollar.
USDC is designed to remain redeemable for one U.S. dollar. On March 11, 2023, it briefly traded near $0.87 after its issuer, Circle, disclosed that $3.3 billion of the reserves backing it—about 8% of the total—was held at the failed Silicon Valley Bank (SVB).
TL;DR
USDC did not fall because its blockchain failed. It fell because the market could not be certain that Circle would recover all of its cash from SVB. The sell-off happened over a weekend, when USDC could still trade around the clock but normal banking and redemption channels were limited.
USDC returned to one dollar after U.S. regulators guaranteed that all SVB depositors would have access to their money on Monday, March 13. The episode showed that a stablecoin can carry traditional banking and liquidity risk even when it operates on a blockchain.
What Happened
SVB failed on Friday, March 10. Circle then confirmed that a wire transfer intended to move $3.3 billion out of the bank had not completed before regulators took control.
That created two immediate questions: Would Circle recover the full deposit, and could it continue redeeming every USDC for one dollar? Circle said it would cover any shortfall with corporate resources, but traders still had to price the risk before the outcome was known.
The timing made the problem worse. USDC continued trading on crypto markets during the weekend, while the banking system used for minting and redemptions was not operating normally. Sellers therefore accepted less than one dollar rather than wait, pushing the market price down to roughly $0.87 on some exchanges.
Why USDC Recovered
On Sunday, March 12, the U.S. Treasury, Federal Reserve, and FDIC announced (opens in a new tab) that all SVB depositors would be made whole and could access their funds the next morning. This removed the feared reserve loss. Circle confirmed (opens in a new tab) that the $3.3 billion would be fully available, and USDC returned toward $1 as banking and redemptions resumed.
The recovery did not mean the concern was irrational. Before the government announcement, traders genuinely did not know how much of the deposit would be recovered or how quickly Circle could replace it.
What It Demonstrated
A dollar-backed stablecoin depends on more than code. Its stability also relies on:
- The quality and availability of its reserves.
- The banks and custodians holding those reserves.
- Reliable minting and redemption channels.
- Market confidence that one token can still become one dollar.
USDC recovered quickly and Circle ultimately honored one-dollar redemptions, but the event exposed a real weakness: on-chain assets can trade continuously while the traditional financial infrastructure behind them does not. “Stable” describes the goal, not a guarantee that the market price can never move.