The decoupling of USD Coin (USDC) and Dai (DAI) from the US dollar sparked a loan repayment frenzy over the weekend, allowing borrowers to save a total of more than $100 million on their loans.
Following the failure of Silicon Valley Bank on March 10, the USDC price fell to a low of $0.87 on March 11 out of concern that their reserves were blocked at the SVB.
MakerDAO’s DAI stablecoin also briefly depegged, down to $0.88 on March 11according to CoinGecko.
The decoupling, against the backdrop of increased crypto turmoil, led to more than $2 billion in loan repayments on March 11 in decentralized lending protocols Aave and Compound, more than half of which was in USDCaccording to a report by digital asset data provider kaiko.
Another USD 500 million in debts were paid in DAI the same day, he pointed.
This eased as both the USDC and the DAI began heading back towards their parity. In the days that followed there weren’t nearly as many repayments, with only about $500 million in loan repayments totaling via Tether (USDT), USDC, DAI, and other coins on March 12, and about half of that on March 13.
Blockchain analytics firm Flipside Crypto estimates that USDC borrowers saved $84 million as a result of repaying loans while the stablecoin was unpegged, and those using DAI saved $20.8 million.
“In general, DeFi markets experienced two days of huge price dislocations that spawned myriad arbitrage opportunities across the ecosystem, and highlighted the importance of USDC,” Kaiko’s report said.
The decoupling of USDC also led MakerDAO to reconsider its exposure to USDC, since the crypto projects that incorporated DAI in their tokenomics suffered losses due to a chain reaction.
Circle’s USDC began its return to $1 following confirmation from CEO Jeremy Allaire that its reserves were safe and the firm had new banking partners lined up, along with government guarantees that SVB depositors would be repaid.
According to CoinGecko data, USDC was trading at $0.99 at the time of writing.
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