DeFi Protocol Curve’s $500M Stablecoin Pool Hammered as Traders Flee USDC

The collapse of Silicon Valley Bank is causing turmoil in crypto stablecoin markets.

AccessTimeIconMar 10, 2023 at 10:51 p.m. UTC
Updated May 9, 2023 at 4:10 a.m. UTC
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Key infrastructure supporting stablecoin trades on decentralized finance (DeFi) exchange Curve is falling out of balance amid fears that 3pool’s triad of tokens could be impacted by the sudden downfall of tech-forward Silicon Valley Bank.

Curve 3pool, a liquidity pool with over $510 million in USDC, DAI and USDT, is supposed to hold roughly equal balances of all three. But at press time the share of USDT had shrunk to less than 7% while USDC and DAI had ballooned to over 46% apiece.

The imbalance speaks to crypto investors’ sudden flight from assets linked to Circle’s USDC stablecoin; DAI is partially backed by USDC. Their fears are being stoked by speculation that a portion of Circle’s cash reserves – the assets backing USDC – may be locked up in collapsed Silicon Valley Bank.

Circle has previously said it holds a portion of its $43 billion reserves at Silicon Valley Bank. On Friday the tech lender’s deposits were seized by federal regulators after a run on the bank triggered its collapse. Silicon Valley Bank is the second-largest bank to go bust in U.S. history, and the first since the financial crisis of 2008.

“Curve pools have become a bellwether for investor sentiment regarding stablecoins,” said Andrew Thurman, head of research at data firm Nansen. “They also play a key structural part in maintaining on-chain pegs, and an imbalanced pool can exacerbate liquidity woes, adding to panics.”

By the numbers, 3pool has never before held such a small relative share of Tether’s USDT token as it does now, per a Dune Analytics dashboard created by Subin An, a data analyst for crypto fund Hashed.

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Danny Nelson

Danny is CoinDesk's Managing Editor for Data & Tokens. He owns BTC, ETH and SOL.


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