This article comes from DappradarThis article comes from

, the original author: Sara Gherghelas, compiled by Odaily translator Katie Ku.

With the official bankruptcy of Silicon Valley Bank (SVB), Circle, one of its customers, may lose part of its USDC collateral, and then USDC will be decoupled. This phenomenon is reminiscent of the crypto black swan events of 2022, such as the collapse of Terra Luna, the collapse of Three Arrows Capital and FTX. With financial regulators responding to SVB’s debt and Circle’s active operations, USDC prices are now back at anchor. Still, USDC volatility has caused widespread panic and uncertainty in the market.

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How are stablecoins doing?

Shocks in the Dapp and crypto industries are highly correlated with macroeconomic events.

U.S. crypto firm Circle, the company behind the second-largest stablecoin USDC, was one of the companies most affected by the SVB drop. The stablecoin lost its peg to the U.S. dollar and hit a new all-time low on March 11 after the company revealed that almost 8% of its $40 billion in reserves, or $3.3 billion, was in Silicon Valley Bank.

The price of USDC fell to a low of $0.8789 as panic spread throughout the crypto community as USDC de-pegged from the U.S. dollar. As of the day’s close, USDC supply involved a net outflow of $1.9 billion, a drop of 4.4% overnight from $42.74 billion on March 10 to $40.84 billion on March 11.

Nonetheless, stablecoins TrueUSD (TUSD) and Dai (DAI) saw significant supply growth during the same period, with net inflows of 57.4% and 27.4%, respectively. The supply of other stablecoins such as Tether (USDT) and Frax (Frax) also increased slightly. In absolute terms, DAI gained the most, increasing supply by $1.35 billion, although it also suffered in the process.

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Source: CoinGecko

However, the supply of BUSD, which was hit by U.S. regulators’ sanctions against issuer Paxos in February 2023, remained relatively unchanged. The BUSD supply decreased slightly by 4.66 million (-0.1%).Still, the downfall of SVB serves as a reminder of the potential risks involved in the crypto industry and the importance of risk management.

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DeFi trades surge amid USDC volatility

DeFi is the Dapp category most vulnerable to market crashes and times of uncertainty. When FTX and Luna crashed, DeFi was clearly affected. On March 11, after the collapse of SVB and the decoupling of USDC, the TVL (Total Locked Value) of the DeFi market dropped significantly, from $79.28 billion to $71.61 billion, a drop of 9.6%. The news caused panic among investors, leading to heavy selling and a drop in TVL.

Fortunately, on the 13th, Silicon Valley Bank’s USDC reserves were fully open to the public, and the news caused DeFi TVL sales to soar 13% to $81.15 billion. Additionally, the number of unique active wallets (UAWs) interacting with DeFi contracts rose 13% between March 8 and March 11, from 421,026 to 477,094.

The number of transactions also increased by 23% from 1,356,483 to 1,668,992 during the same period.Which DeFi Dapps are the cause of the peak on the DeFi chain? Uniswap V3 is one of the most popular DEX,

Its unique active wallets (UAW) count has grown significantly, surpassing 67,000 on Saturday, March 11, with $14.4 billion in transaction volume, the highest number ever registered by V3. 67,000 uniquely active wallets is the highest number registered on a Uniswap Dapp since summer 2021.Additionally, the average trade size on Uniswap V3 on Saturday was $170,080, almost double the average,

This shows that Ethereum DeFi whales were very active last weekend.

DeFi aggregator 1inch Network set a record for Dapp transaction volume of $3.4 billion on Saturday, ranking second among DeFi Dapps. 1inch registered more than 24,000 independent active wallets that day, indicating its popularity in the DeFi field.

Additionally, MetaMask Swap, a popular token exchange built into leading wallet software, also experienced a surge in unique active wallets and transaction volume on March 11, reaching 91,000 unique active wallets and $11.9 million in transaction volume, This is the data we saw in early January 2023, when rumors about the MASK token were circulating in the market.

While banks are closed for the weekend and traditional investors have to wait until Monday to act on SVB news, DeFi 7* is online 24/7. This highlights the need for open systems and transparency.

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Blue Chip NFTs Are Still a Stable Investment in a Chaotic Market

For most of 2023, the NFT industry has been on an upward trajectory, with record sales and rising mainstream adoption. However, the collapse of SVB and its impact on USDC was also reflected in the market.

NFT transaction volume has dropped by 51% since the beginning of the month, and sales have dropped by 15.88%. NFT trader activity fell as everything was weighed down by "volatile stablecoins," with Saturday seeing the lowest number of traders participating (12,000) since November 2021 and the lowest number of singles in 2023. Number of transactions per day (33,112).

It is worth noting that despite the low activity of NFT traders, the transaction volume has not been affected by the same proportion, most likely because Ethereum's NFT whales are still insisting on farming in the Blur phase 2 airdrop.

Despite the overall decline in NFT trading volume, the floor price of blue-chip NFTs such as BAYC and CryptoPunks has barely been affected, only slightly below $100,000 on March 11. The “recovery” has been quick, showing the resilience of these top NFTs.

Other blue-chip franchises such as BAYC Ecosystem, Azuki and Art Blocks were barely affected. On the other hand, the Moonbird and PROOF ecosystems were hit hard by SVB.

Notably, Yuga Labs has "very limited" exposure to Silicon Valley Bank, meaning the company's financials won't be significantly impacted by the crisis.

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Crypto gaming also proves its resilience in times of financial turmoil

The video game industry has shown remarkable resilience during economic downturns, leading many analysts to believe it will be immune to a recession. The most recent proof of that was in the 2008 recession, when video game sales rose 12 percent, while major game studios like Blizzard and Nintendo hit new highs for both deals and console sales.

Is the same for Web3 games? The truth is, it’s too early to tell, but unlike other dapp categories, activity in the gaming space is the least volatile over the weekend.

On-chain gaming activity was only down 5% over the weekend, but was up 10% from the previous week. So while DeFi traders are highly active amidst the possibility of USDC crashing, Web3 players are still playing as usual.Web 3 games should perform similarly to traditional video games, successfully avoiding periods of severe economic volatility.

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Which Dapp ecosystems are more affected?

The collapse of Silicon Valley Bank sent ripples through the cryptocurrency community, including several Dapp ecosystems. Circle, Paxos, Coinbase, BlockFi, and the Avalanche Foundation have publicly confirmed their open positions. Meanwhile, Dapper Labs, Ripple, Yuga Labs, Pantera, Proof Collective, Nova Labs, and Techteryx only shared what they were disclosed.

One of the most significant impacts of SVB's collapse was on the USDC stablecoin. Panic spread in the crypto community, causing the price of USDC to drop to a low of $0.8789. USDC’s supply was $1.9 billion, a drop of 4.4% from $42.74 billion on the 10th to $40.84 billion on the 11th. The decoupling of USDC has affected several Dapp ecosystems including MakerDAO.

MakerDAO is the fourth-largest issuer of the stablecoin DAI and currently has over $3.1 billion worth of USDC as collateral for DAI. To reduce the protocol’s impact on USDC, MakerDAO implemented emergency governance measures on Tuesday. MakerDAO has cut the debt ceiling of USDC liquidity pools to 0, meaning liquidity providers will not be able to borrow DAI from these liquidity pools.

The move highlights the risks of backing stablecoins with assets that need to be custodied by banks. In this case, USDC was depegged over the weekend after USDC issuer Circle stated that it was exposed to about 8% of its total reserves in Silicon Valley Bank. USDC accounts for 40% of DAI collateral, making it vulnerable to this centralization risk.

Maker reduced the debt ceiling of the four Uniswap vaults backing USDC to zero because “these collaterals are at risk from potential USDC contingencies.” The agreement expanded support for Paxos’ USDP stablecoin, increased the debt limit on its USDP vault from $450 million to $1 billion, and lowered USDP Swap fees from 0.2% to 0%.

The opposite is the case for Gemini’s stablecoin, GUSD, according to the proposal, which argues that Gemini has “substantial exposure to uninsured bank deposits, which may be related to risky institutions.” To limit potential losses, Maker lowered GUSD’s daily minting limit from 50 million DAI to 10 million DAI.

The proposal plans to limit the possibility of DAI transactions exceeding its peg by reducing the stablecoin’s daily minting limit from 950 million to 250 million. Additionally, the proposal increases the USDC Swap fee from 0% to 1%, making it more expensive for investors to convert USDC to DAI. Finally, the proposal calls for temporarily withdrawing all funds from Aave and Compound to reduce overall risk.

In conclusion, the collapse of SVB affected several Dapp ecosystems including MakerDAO. The decoupling of USDC has caused panic throughout the crypto community, highlighting the risks of backing stablecoins with assets that require bank custody. MakerDAO’s emergency governance measures are aimed at reducing its exposure to USDC and limiting potential losses. While the long-term impact of SVB’s collapse remains unknown, it’s clear that it had a major impact on the cryptocurrency market.The collapse of SVB and Signature Bank has brought new revelations to the crypto industry, especially the Dapp ecosystem -The crypto industry needs to become more “self-sufficient,” and proposals to reduce reliance on traditional banking infrastructure must be on the agenda.