USDC (USD Coin) is a **stablecoin** linked to the value of the US dollar (1 USDC = 1 USD). It is issued by licensed financial institutions (like Circle and Coinbase) and is backed by reserve assets such as cash and government bonds.
### **Can the price of USDC drop?**
Yes, in theory **the price of USDC could drop** below 1 dollar, but this is rare and occurs in specific cases, such as:
1. **Loss of confidence**:
- If investors doubt the issuer's ability to redeem reserve assets, they may sell USDC at a lower price (example: $0.98).
- This occurred temporarily during the **Silicon Valley Bank crisis (March 2023)** when Circle announced that part of its reserves was held at the bank, causing the price of USDC to drop to ~0.97 dollars before recovering.
2. **Technical or liquidity issues**:
- If trading platforms are disrupted or there is difficulty converting USDC to dollars, the price may temporarily drop.
3. **Government oversight**:
- Any legal action against the USDC issuer (like asset freezes) may affect investor confidence.
4. **Cyber attacks or smart contract errors**:
- Hacking of USDC smart contracts or coding errors may cause disruptions.