Bitcoin Surges to $50,000, But Only Against USDC

On the morning of March 13, Bitcoin unexpectedly surged back to the $50,000 mark, a price level not seen since November 2021. What triggered this sudden spike?

BTC/USDC Trading Pair Sees Price Surge on Binance

On March 13, the BTC/USDC trading pair on Binance suddenly hit $50,000—matching the highs of November 2021, before the crypto industry fell into its current bear market.

The spike is attributed to the liquidity crisis facing USDC, the stablecoin issued by Circle.

On March 11, USDC's value fell significantly below $1 after Circle revealed that $3.3 billion, representing about 8.25% of USDC's total reserves, was trapped at Silicon Valley Bank. This led to a mass sell-off of USDC as users fled to other stablecoins, causing substantial depegging.

With USDC pools on DeFi platforms like Curve draining rapidly, Binance suspended USDC to BUSD conversions to manage the conversion pressure. Coinbase also halted USDC-to-USD swaps over the weekend until U.S. banks reopened.

USDC plummeted to $0.882, marking its deepest depegging since July 2020, worse than the LUNA-UST or FTX crises.

USDC Price Action in the Last 24 Hours
Screenshot from CoinGecko at 11:10 AM on March 13, 2023

However, Circle has announced that it can recover the trapped funds and will resume USD conversions at a 1:1 ratio starting Monday morning (U.S. time). This has helped USDC's price rebound to near $1.

In response to the situation, Binance seized the opportunity to launch futures trading for the USDC/USDT pair with up to 30x leverage. Other exchanges like OKX, Huobi, Bitmex, and Bybit had previously offered similar options with up to 50x leverage. Additionally, Binance added spot trading pairs for BNB/USDC, BTC/USDC, and ETH/USDC to attract more liquidity and support Circle’s stablecoin.

Silicon Valley Bank Update

As reported, U.S. authorities are racing to stabilize the financial system following the collapse of Silicon Valley Bank (SVB) over the weekend. After a severe liquidity crisis, SVB was shut down by California regulators on March 10 and its assets were handed over to the FDIC. This is the second-largest bank failure in U.S. history, following Washington Mutual during the 2008 financial crisis.

In a joint statement from U.S. Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell, and FDIC Chair Martin J. Gruenberg, all deposits at SVB will be guaranteed, including those exceeding $250,000. The Fed announced a "bank funding program" with more lenient terms to meet the needs of depositors. While the Treasury Secretary ruled out a government bailout for SVB, she allocated $25 billion from the Exchange Stabilization Fund to the Fed’s program, although this amount is not expected to be utilized.

As a result, global financial markets and the crypto sector are starting to recover, with Bitcoin rebounding to $22,600 this morning. Circle's beleaguered stablecoin has also seen its exchange rate recover, though it has yet to return to its $1 peg.

However, these efforts are focused on protecting users rather than rescuing SVB or setting a precedent for other troubled banks, a government official confirmed to Bloomberg.