Trader Loses Entire Investment in Real USD Crisis, Value Bot Nets Over $100K
Summary:
A trader reportedly lost their entire investment during a recent crisis with the Real USD (USDR) stablecoin, trading 131,350 USDR for no USD Coin (USDC). This came amid a liquidity crunch that caused USDR's value to fall by nearly 50%. An extractable value bot took advantage of the situation, earning a $107,002 arbitrage profit. Furthermore, despite USDR being fully backed, its value dropped after users called for major stablecoin redemptions. Analyst Tom Wan explained this was due to liquid assets being backed with non-liquid ones.
In the middle of a recent instability with the U.S. dollar-based stablecoin, Real USD (USDR), one trader seems to have traded 131,350 USDR for absolutely no USD Coin (USDC), essentially wiping out their investment. On the 12th of October, Lookonchain, a firm specializing in blockchain data analysis, indicated that this exchange took place on the BNB Chain via the decentralized exchange platform, OpenOcean, around the time USDR's value fell by almost 50%. This was due to a shortfall in liquidity. An extractable value bot noticed this notable difference, ultimately turning a $107,002 profit from an arbitrage transaction. During moments of insufficient liquidity, price deviations on decentralized exchanges can soar up to 100%. In September 2022, Cointelegraph shared a story about a trader who tried to sell $1.8 million worth of Compound USD (cUSDC) through Uniswap DEX V2 but received a meager $500 worth of assets. Yet again, an extractable value bot capitalized on the situation for a handsome profit, only for it to be stolen a few hours later. On October 11, USDR's value went downhill after users pushed for over 10 million stablecoin redemptions. Despite being completely backed, only less than 15% of its $45 million assets were backed by liquid project tokens from TNGBL, while the rest were backed by non-liquid tokenized real-estate assets. As pointed out by analyst Tom Wan, the tokenized assets, created based on the ERC-721 standard, were not convertible into fractional shares, thus failing to provide liquidity for investor redemptions. In addition, the core homes could not be liquidated quickly enough to satisfy investor's withdrawal demands. In the end, the Real USD Treasury failed to process the redemptions, which led to a dramatic drop in investor confidence. Tom Wan also addressed why USDR's value crashed despite full backing—due to backing liquid assets with non-liquid ones. He explained that while USDR was 100% backed, 50% of this backing came from stablecoins, and the rest was from the real estate sector. When there was a bank run situation with massive USDR redemptions, the stablecoin's liquidity took a hit.
Published At
10/12/2023 4:00:00 PM
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