Last week, another stablecoin de-pegged, which is the third stablecoin de-peg in August. Since the UST meltdown, many stablecoins have not been quite “stable”. Following the disclosure of the significant risks that threaten USDT due to its insufficient reserves, many stablecoins have de-pegged.
Although stablecoins face a host of problems, they still account for 15% of the total market cap of cryptocurrency, and USDT, USDC, and BUSD continue to hold 90% of the total stablecoin market cap.
That being said, following the UST meltdown, USDT suffered a minor de-peg, which led to a crisis of confidence. Despite the 20% market cap slump, USDT still ranks as the No.1 stablecoin, accounting for 44.17% of the total stablecoin market cap.
There were stablecoins that de-pegged before the UST meltdown. On April 4, 2022, USDN, a stablecoin backed by Waves, fell to $0.83, a major de-peg. The stablecoin once again de-pegged on August 26, with the price dropping to $0.9.
In May 2022, the algorithmic stablecoin UST plummeted and was trapped in a death spiral, which led to the bankruptcy of many projects and companies. In the meantime, the UST crash also wiped out most of the market cap of decentralized stablecoins. Right now, the UST price stands at $0.02466.
Market Cap Trend of DAI
Following the UST meltdown, USDX, Kava Network’s native decentralized stablecoin, dropped to $0.66 and bottomed out at nearly $0.55, which is well below its presumed peg to the dollar.
In May, DEI, a stablecoin issued by the derivatives protocol DEUS Finance, de-anchored, and its price hit as low as $0.37.
On June 20, USDD, a stablecoin native to the TRON ecosystem, stood at about $0.9595, which indicates an approximately 4% de-peg.
On August 14, aUSD de-pegged and fell to around $0.7. On August 23, the stablecoin de-anchored once again, with the price falling to around $0.7734.
On August 19, HUSD lost its dollar peg, and its price was as low as $0.84.
Earlier this month, after US authorities announced sanctions against Tornado Cash, MakerDAO co-founder Rune Christensen said on Discord that MakerDAO may sell all of its USDC exposure in the protocol, a move that could see the DAI abandoning its dollar peg. He later stated on social media that DAI’s de-peg from USDC is the best way for the project to achieve decentralization. It has been reported that 80% of the collateral assets behind DAI are in stablecoins and 60% in USDC.
It should be noted that after the TC sanction, the USDT issuer Tether also announced that it has not been contacted by regulations and will not freeze the addresses relating to Tornado Cash for now, but will comply with requests from US authorities.
Compared to fiat currency, decentralized stablecoins are more stable, transparent, efficient, and censorship-resistant. Moreover, the cost of holding stablecoins is also lower. Once a stablecoin de-pegs from real-world assets, it would become more resistant to censorship. This achieves full decentralization, which is what the blockchain space advocates. However, such a de-peg also exposes investors to greater risks as the stablecoin could easily de-peg under extreme market conditions or during a liquidity crisis. Apart from that, issuers are required to overcollateralize other assets transparently so that users will trust their stablecoins, which also makes it very expensive to mint stablecoins.
Although decentralization is frequently touted in the crypto market, we can tell that investors heavily rely on “centralized assets” based on the high market cap of fiat-backed stablecoins. That being said, as the DeFi market steadily moves forwards, new types of decentralized stablecoins have emerged. I hope that DeFi’s stablecoin market cap could keep growing, which would foster a more versatile range of stablecoins.
Speaking of the DeFi market, we have to mention AMM, which is a widely recognized investment channel. Despite its popularity, AMM is associated with great risks as on-chain marketplaces suffer from delays and runaway projects. Recently, I’ve noticed that an exchange called CoinEx also offers AMM and allows makers to share nearly 50% of the fees. Plus, on CoinEx, AMM profits are calculated every day, which is quite convenient, and users are assured of great asset security.
Looking around, I haven’t found any other AMM financial service in the crypto market. Click on the link below to try out this industry-leading product:
https://www.coinex.com/amm
Disclaimer: This article offers no investment advice, and all statistics mentioned herein are for reference only. The information provided herein may not be relied upon for investment decisions, for which you will be fully liable.
We've shared and upvoted your post on @crypto.defrag
Downvoting a post can decrease pending rewards and make it less visible. Common reasons:
Submit