Silicon Valley Bank collapsed on Friday

Silicon Valley Bank collapsed on Friday in the largest US bank failure since 2008, roiling global markets and stranding billions of dollars belonging to companies and investors.

Stablecoin USD Coin (USDC) lost its dollar peg and slumped to an all-time low on Saturday after Circle, the US firm behind the coin, revealed some of the reserves backing it were held at Silicon Valley Bank.

Circle has $3.3 billion of its $40 billion of USDC reserves at collapsed lender Silicon Valley Bank, the company said in a tweet Friday.

The coin broke its 1:1 dollar peg and fell as low as $0.88 early Saturday, according to market tracker CoinGecko. It recovered slightly to trade around $0.90.

Traders have been on waiting this week for signs of contagion in the financial sector and beyond from troubles for Silicon Valley Bank and crypto-focused Silvergate (SI), which this week disclosed plans to voluntarily liquidate.

What happened?

Everything started to come off on Wednesday when SVB said it had bought a bunch of securities at a loss and that it would promote $2.25 billion in new shares to shore up its balance sheet. That caused a panic amongst key capital firms, who reportedly recommended corporations withdraw their cash from the bank.

The company’s inventory cratered on Thursday, dragging different banks down with it. By Friday morning, SVB’s shares have been halted and it had deserted efforts to shortly elevate capital or locate a buyer. Several different financial institution shares have been quickly halted Friday, which includes First Republic, PacWest Bancorp, and Signature Bank.

This is a complex situation that has a lot of people wondering what are the consequences and how it’s going to affect them directly.