• Last weekend, USD coin (USDC) fell to as low 87 cents due to news of Circle Internet Financial’s exposure to Silicon Valley Bank.
• This caused a wave of USDC sales across decentralized-finance platforms and a surge in the withdrawal of tether (USDT) from Binance.
• Two high-frequency trading firms capitalized on USDC’s plight, with one wallet making $16.5 million in profit in a day by trading tether for USD coin and DAI.
USDC Plummets After News of Circle Internet Financial’s Exposure
Last weekend, the U.S dollar-pegged stablecoin USD coin (USDC) fell to as low as 87 cents on news that Circle Internet Financial, its issuer, had exposure to Silicon Valley Bank, which collapsed last Friday. This sparked a wave of USDC sales across decentralized-finance platforms and an increase in the withdrawal of tether (USDT) from crypto exchange Binance.
High-Frequency Trading Firms Take Advantage Of Price Drop
Two high-frequency trading firms were quick to capitalize on USDC’s plunge and take advantage of the arbitrage opportunity it presented when it traded below 90 cents – one wallet receiving $215 million worth of tether from Binance before executing 59 transactions that involved swapping USDT for USDC and the DAI stablecoin and making a profit of around $16.5 million according to CryptoQuant research.
Risk Involved With Trading Stablecoins
Despite this lucrative opportunity presented by USDC’s depeg, traders faced significant risk due to lack of available information surrounding the situation. Mike van Rossum, founder of trading firm Folkvang commented “Given what recently happened to FTX and other big crypto players, you can see why many wanted to be careful when taking positions” .
What Does The Future Hold?
It remains unclear how long this period volatility will last for but it is likely that high frequency traders are already looking ahead at potential arbitrage opportunities between different exchanges or even different currencies depending on market sentiment over the coming days/weeks/months .
Conclusion
The events that unfolded last weekend have highlighted both the risks associated with trading volatile assets like cryptocurrencies but also the huge rewards available if traders are able identify profitable trades quickly enough before markets move against them .