USDR Stablecoin Loses Dollar Peg Due to Rapid Redemptions and Depletion of Treasury Assets
Summary:
The real estate-backed stablecoin USDR has deviated from its peg to the U.S. dollar following a rush of redemptions, leading to a significant depletion of its assets, including Dai from its treasury. During a short time period, all of the liquid DAI from the USDR treasury was redeemed, resulting in a sharp reduction in the market cap and triggering a panic sell-off, which eventually caused a depeg. Despite the coin's value nose-diving by nearly 50%, the project’s developers are aiming to find a resolution to the liquidity problem.
The stablecoin USDR, which is backed by real estate, has lost its link to the U.S. dollar due to an overwhelming number of redemptions causing a depletion of liquid assets like Dai (DAI) from its reserve, according to its project team. USDR, a product by Tangible protocol, is underpinned by a combination of cryptocurrencies and real estate assets. Tangible Protocol is a decentralized finance initiative set on tokenizing housing and other tangible assets. A notable trade center for USDR is the decentralized exchange, Pearl, which is based on the Polygon network.
On October 11th, Tangible made a public statement clarifying that within a short time span, the whole of available DAI from the USDR reserve was redeemed, which lead to a rapid decrease in market cap. "The scarcity of DAI for redemptions spurred panic selling, which resulted in a depeg," it stated. Around 11:30 am UTC, there was a surge of USDR selling, pushing the coin's price down to a low of $0.5040 per coin. The price later slightly bounced back to approximately $0.53. Despite losing almost half its value, the developers of the project promised to devise "solutions" to address the problem. They stated, “The digital and real estate assets supporting $USDR still exist and will aid redemption support.”
According to a statement on its official website as of 9:57 pm UTC on October 11, the app's total assets are worth above the entire market cap of the coin, despite treasury losses. Tangible (TNGBL) tokens, which are part and parcel of the coin's native environment, make up 14.74% of USDR's collateral. The team asserts that the remaining 85.26% are backed by physical housing and an "insurance fund".
In theory, stablecoins are supposed to maintain a consistent value of $1 on the open market. Under intense market conditions, however, they can lose their peg. For instance, the USDC (USDC) from Circle, the sixth-largest cryptocurrency by market cap as of October 11, dropped to $0.885 per coin on March 11 following the collapse of several U.S. banks. Nonetheless, it returned to its peg on March 14. Terra’s UST lost its peg in May and hasn't recovered since, and trades at $0.01 per coin as of October 11, based on data from Coinmarketcap.
Published At
10/11/2023 11:44:45 PM
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