93.68% of the Curve pool is made up of USDN, according to crypto writer Colin Wu’s article. Similar ratios were detected in UST’s Curve pools, indicating that the peg is below strain and that more deposits may be required to maintain equilibrium.
The USDN price, which is expected to remain stable at around $1, dipped to about $0.84 on Bittrex on 8th May after displaying early symptoms of instability. It isn’t the first time the USDN has depreciated considerably against the dollar. After people charged the platform of influencing the WAVES price via its DeFi lending service, Vires. finance, USDN dropped to $0.34 on 6th April.
Algorithmic stablecoins like Waves protocol’s USDN and Terra blockchain’s UST are comparable. In Neutrino’s smart contracts, currency payouts require people to lock WAVES tokens inside the stablecoin to create USDN, while supply and demand are kept in check by using USDN withdrawals to release WAVES supplies.
UST’s Crash
Terra’s UST crash significantly affected the stablecoin market, with fewer algorithmic stablecoins experiencing an increasing burden as their prices fluctuated. Tether suddenly lost its peg, falling to $0.97, as previously covered by U.Today.
The incident that caused panic in the cryptocurrency industry by causing huge losses in BTC and altcoins has now been resolved, with USDT recovering to $1. USDN was trading at $0.93, edging near the $1 mark.
Posing Concerns
It was proposed in the Vires forum that the liquidity requirement for Waves and USDN lenders be lowered to 0.1% and that lending rates be limited to approximately 40%.
Like the suspected Alameda wallet, existing debtors would be required to close their accounts or face instant liquidation if the bill is passed. Most forum users appear to oppose the idea, which will be voted on for five days starting today.
WAVES coins have been sold off by Twitter user @lightcrypto, who claims that the wallet that pushed the price up above that of April has been doing so. While the consequences of a possible USDN meltdown are improbable to have a significant impact on DeFi, certain users, such as Jack Niewold, are concerned about what may occur if Terra’s UST faced a similar predicament, given its growing interconnectivity across DeFi.
The entire episode acts as a warning that not all stablecoins are equal. It’s more crucial than ever for Defiers to understand what they possess before being seduced by enticing headline yields.
