What if a banking-partner failure breaks USDC's peg?
A banking-partner freeze breaking USDC to $0.91 freezes DeFi collateral and forces deleveraging across lending protocols, so ETH (-7.2%) — the dominant DeFi collateral — leads down while BTC is the cleaner hedge. Rhymes exactly with the Mar-2023 SVB-driven USDC depeg to $0.87. Forward angle: post-SVB, issuers diversified banking and added Fed-facility access, so a depeg of this size now implies a far more severe banking event than 2023.
Every number ships with its receipt — the odds, the range, the precedents, and a public grade at Reality Check. The statistical machinery that produces it is proprietary.
The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (electric blue) over time vs the market's (Polymarket, amber), from the past toward the 0–6 months horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. Loading the probability audit trail…
What it would mean
If this plays out, it is a mixed shock. A failed banking partner traps USDC reserves, breaking the peg to $0.91 and freezing DeFi collateral across lending protocols. The trigger decomposes into signed root‑shocks — Credit spreads ▲ · Crypto confidence ▼ · Crypto liquidity ▼ — which propagate through our causal graph to the markets below.