Coinbase’s stock rallies but USDC concerns linger even after feds’ SVB protections


Shares of Coinbase Global Inc. were enjoying a sharp rally Monday amid a tumultuous stretch fueled by uncertainty about the effects of Friday’s collapse of Silicon Valley Bank.

announced Friday that it was putting a temporary weekend pause on conversions between the USDC stablecoin
and the U.S. dollar, though the company said that customer funds “continue to be safe” and that it planned to resume conversions Monday.

The USDC stablecoin is meant to trade at a 1-to-1 ratio with the U.S. dollar, and it was nearly at that ratio again Monday morning after falling as low as 86 cents to the dollar Saturday. Circle, the creator of USDC, disclosed over the weekend that about $3.3 billion of its cash reserves were with Silicon Valley Bank.

Read more: Stablecoin USDC falls below $1, faces $3.3 billion exposure to Silicon Valley Bank

Circle co-founder Jeremy Allaire later tweeted that he was “heartened to see the U.S. government and financial regulators take crucial steps to mitigate risks extending from the fractional banking system” and that “100% of deposits from SVB are secure and will be available at banking open” on Monday.

Coinbase’s stock was up more than 5% in morning trading Monday after falling as much as 5% earlier in the day. The shares fell 8% in Friday’s session.

The USDC developments are important for Coinbase because the cryptocurrency exchange has a revenue-sharing agreement with Circle. As Mizuho analyst Dan Dolev noted in December, “Circle earns interest income on USD held in reserves that back USDC by investing those reserves in short-term treasuries and interest-bearing cash account,” and the arrangement between the two parties means that Coinbase gets a portion of that reserve interest income.

Dolev noted Sunday evening that the market cap of USDC had fallen to about $39.5 billion at the time he published his latest note, from upwards of $43 billion last week. USDC’s market cap was about $40.5 billion Monday morning, according to CoinMarketCap.

He added that revenue from USDC “accounted for ~80% of [Coinbase’s] interest income and 23% of its total revenue” in the fourth quarter, and he expressed concerns about what the decline in USDC’s market cap could mean for the exchange.

Oppenheimer’s Owen Lau said he also was monitoring USDC developments for their potential effects on Coinbase. He previously expected interest income to contribute $766 million to Coinbase’s revenue in 2024, or about 22% of the total.

“The threat of redemption on USDC leads us to lower our interest income estimate to $686 [million], and we will continue to monitor the situation,” he wrote Sunday.

Frances Yue contributed to this report.




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