North Rock Digital CEO Hal Press Believes USDC Will Fully Repeg, Buys More at $0.88

By 0xGorki 03/11/23 10:13 AM

In recent news, Hail Press, the Founder, and CEO of the hedge fund North Rock Digital tweeted about Circle’s reserves and their impact on the USDC stablecoin. According to the tweet, Circle holds 77% of their reserves in 1-4 month T-Bills, which are managed by Blackrock and held at BNY Mellon. This provides an absolute floor on USDC of 0.77, making it a safe investment.

Circle holds 77% of their reserves in 1-4 month T-Bills.
These T-Bills are held at BNY Mellon and managed by Blackrock. This provides an absolute floor on USDC of 0.77.https://t.co/4rDUgIbFRX https://t.co/MHraW8wq7t pic.twitter.com/IdP1gwfKtk

— Hal Press (@NorthRockLP) March 11, 2023

The remaining 23% of Circle’s reserves are held in cash at various entities, with approximately 1/3 of that cash held at SVB. However, SVB is going to liquidate all assets over the next couple of months, and most estimates suggest that they will return no less than 10-20% of the total asset value. This represents a total loss for USDC of 0.8-1.5%. While some are optimistic that the loss could be lower, it is still a potential risk. USDC is trading at $0.91 at the press time.

Despite this risk, Hail Press believes that it is hard to envision a scenario where you lose money buying USDC below 93 cents. In fact, he believes that USDC will fully repeg, and is buying more at 88 cents as he believes it is simply the best risk-reward ratio he has seen in a long time.

The audit of Circle’s reserves was done by Deloitte, and many investors are taking comfort in this fact. However, recent news from Lookonchain has reported that the infamous whale CZSamSun has been buying USDC for arbitrage. Following the de-pegging of USDC, the whale deposited stETH and ETH to Aave and Instadapp, borrowed USDT, and purchased USDC. The whale exchanged 28,577,700 USDT for 29,961,238 USDC, potentially yielding over $1.3 million in profits once USDC returns to the peg.

Vitalik Buterin, the creator of Ethereum, recently converted 20,040 RAI to 56,746 USDC using his vitalik.eth address. RAI is a stablecoin backed by ETH that uses an algorithmic mechanism. Buterin has previously expressed optimism about the RAI model, but it remains unclear whether his recent move can be seen as a show of support for USDC.

In light of these developments, Circle has revealed that $3.3 billion of their USDC reserves remain at Silicon Valley Bank amid insolvency concerns. This has raised questions about the overall stability of USDC, and investors are closely watching the situation.

Overall, the situation with USDC is complex and nuanced. While Circle’s reserves provide a floor on the value of USDC, there are still risks associated with holding the stablecoin. Investors should carefully consider these risks before making any investment decisions.

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