- This highly liquid position serves to protect reserves
- The deal involves major banks, including Goldman Sachs
Circle has rebalanced the USDC token collateral again. The Black Rock Fund, which manages the asset reserves, has entered into several repurchase transactions totaling about $8.7 billion.
Repo is a buy/sell transaction for a derivative with a commitment to repurchase the asset as soon as possible at a slightly higher price. In fact, it is an instrument of secured lending.
Such transactions are also called “overnight”.. Borrower uses derivatives, such as Treasury bonds, as collateral. The next day he buys them back at a higher price.
For banks and other large counterparties, this is an easy and quick way to get a large amount of capital.
For Circle, a kind of “protection” in case the U.S. government defaults and is unable to pay its obligations.
From BlackRock documentation, the repo deal involves counterparties such as BNP Paribas, Goldman Sachs, Barclays and Royal Bank of Canada:
The Circle noted that the plan to add repo agreements to reserves has been underway for several recent months.
But the company also did not deny the fact that this highly liquid position serves as a “protection tool” against an “unlikely” default.
The company had previously completely liquidated a portfolio of bonds with a maturity of more than a month. So is the default scenario unlikely?
And what should traders do? Well, following Kiyosaki’s advice, one should invest in gold and BTC, and buy a shotgun, for self-defense, of course.