Coinbase are planning to
resume redemption 1:1 of USDC for USD, once banks are open again, so arbitrage will play out of buying USDC under $1 and selling 1:1 for dollar until the price returns to parity. Despite all the doom and gloomers out there expecting USDC to go to zero, the likelihood hood (right now) of that happening is very low.
TL:DR: USDC de-pegging in this scenario isn't good or bad for Bitcoin, it's simply irrelevant.
Coinbase is just being optimistic. i would be surprised if they do so, although some people have said that even in the WORST case scenario (no buyer for SVB), FEDs would immediately issue a 62% 'dividend' with eventual recovery up to 94%.
Coinbase doesn't care about SVB. They'll take the L imo and deal with it overtime. They have 5 other banks and fortunately
only had 8% exposure ($3.3b) out of $40b in SVB.
You could say they got lucky... I would. Could have been more like 13% if it was split equally between the 6 banks they use. Or 50% if only two banks!
Then they would have been completely f**ked...
So, it that case Circle gets 0.62X3.3=2.05 bil, with the shortfall "just" 1.254bil, which is about 3%, which later (1-2 years) becomes about $200mil (6% of 3.3 bil).
Since Circle is earning about 1.56 bil/year on it's Treasuries, it is a situation sthat theoretically should resolve positively.
In this case, at worst, they lost 2 year of income then? I think they'll deal with it. Take the L and move on, maybe hope for the 62% compensation. After all Circle = Coinbase, so still lots of income.
The only real imminent concern would be USDC circulating supply dropping below $3.3 billion (-92%), as presumably that's what they can''t cover (at least not yet without a loan). That's why there will be selling from customers, but it'd take 90%+ redeeming for dollar for there to be a significant liquidity issue it seems. Meanwhile, I personally think they'd manage to secure a loan if that was happening.
Also, there are big VCs who stepped in to buy at $0.92 - almost as short-term loan - looking to redeem their USDC 1:1 for dollars on Monday. Ie they don't need USDC to go back to $1, they will just redeem 1:1. Then buy again presumably if USDC is still below $1, and recycle arbitrage... Maybe I'm being too optimistic, but I don't see this as an FTX-style enormous hole in bank balances. We're talking about a 8% liquidity loss.
TL;DR If numbers are similar to what I posted, USDC might recover to about 0.97 by Monday.
I know you said Monday, but the past hour it's
already back to $0.98 !
Sure it could be below $0.97 by Monday, but even so...
Discount evaporating fast.
FUD is passing.