TrueUSD (TUSD) is a cryptocurrency designed to provide stability within the volatile blockchain-based money industry. The price of TrueUSD is pegged to the US dollar on a one-to-one basis, with the aim of offering crypto traders a safe haven during periods of massive market fluctuations.
For a while, it appeared that the sun was beginning to shine on the crypto market again. Because of the Bitcoin spot ETFs filed by BlackRock and several other firms with the US Securities and Exchange Commission (SEC), it seemed that widespread institutional adoption of crypto was underway.
The crypto market reacted excellently, with several top cryptocurrencies rallying to the upside by double-digit percentages.
However, it appears that the dark clouds are not completely gone. The latest in the long line of crypto market drama is the recent depeg of TrueUSD on Tuesday, this week.
Stablecoins de-pegging is a relatively frequent occurrence, and several stablecoins have lost their $1 pegs in the past.
However, TrueUSD has done something quite exceptional – Depegging twice, in less than a week.
While the crypto market surprisingly hasn't gone up in flames in reaction to the news, read on, to find out what really happened.
For quite some time, TrueUSD has come under fire, over issues of transparency (something that no decentralized cryptocurrency, let alone a stablecoin should be associated with).
Despite the issues with TrueUSD, however, the stablecoin received backing from Binance (the largest CEX by volume in the world) and has become the biggest Bitcoin trading pair on the exchange (BTC/TUSD presently accounts for roughly 15% due to its 0% costs).
However, despite the stablecoin's popularity, it now appears that TUSD is dealing with yet another de-pegging event, despite categorically denying any link to Prime Trust, the crypto custodian firm.
This now marks the second de-pegging incident on one stablecoin, in a single month.
According to a tweet from the blockchain and crypto security firm PeckShield, It first started with TUSD's stability suffering as its value dropped to $0.9974 against Tether (USDT) on Binance.
As if that wasn't enough, it dropped further to $0.80 on Binance.US (Binance's American counterpart), owing to its exposure to Prime Trust.
As a result, TUSD withdrawal has commenced from the Binance launch pool of Maverick Protocol (MAV).
The Curve pool, which holds TUSD, has seen a significant imbalance in its reserves. The imbalance has caused the deposit and loan interest rates of TUSD on Aave V2 to surge to unprecedented levels. Deposit rates have reached 42%, while loan rates have skyrocketed to 54%.
This imbalance has prompted whales and investors to sell their TUSD holdings and swap them for other stablecoins, such as USDC. As a result, the price of TUSD has fallen to $0.997. TUSD has implemented a plunge protection mechanism with $20 million allocated to buy orders, which has helped to maintain the price above $0.70 on Binance. However, an additional $21 million infusion would be necessary to prevent the price from falling further.
Adam Cochran, partner at Cinneamhain Ventures, in a lengthy Twitter thread, has criticized TrueUSD (TUSD) for several reasons.
First, the auditor certifying the USD audits at Prime Trust, TUSD's custodian, is the same auditor that audited FTX, the same cryptocurrency exchange that has been accused of fraud in November last year.
Second, TUSD's chain oracle, which is responsible for certifying reserves, consists of only 17 different nodes, all from the same source.
Third, TUSD's official emitters have denied that Prime Trust is the only partner to mine and redeem TUSD, but they have also paused minting and redeeming due to issues with Prime Trust.
Fourth, Prime Trust has lost access to legacy wallets and used customer funds to buy back crypto.
Fifth, Prime Trust owes its clients $150 million but only has $91,542,000 in assets. And Sixth, some people have tried to redeem TUSD and have instead gotten their tokens back on the chain, or have been sent USDT on Binance instead of getting USD back.
Despite recent claims and concerns, TrueUSD maintains that it has no direct exposure to crypto custodian Prime Trust.
The withdrawal of TUSD from the MAV launch pool on Binance may be a precautionary measure rather than a direct consequence of the Prime Trust situation. Additionally, the attestation of TUSD's reserves by The Network Firm (the same auditing firm associated with the FTX scandal), does not automatically imply wrongdoing or fraud in the TUSD audits.
These events serve as a reminder of the risks associated with stablecoin stability and the importance of robust custodial arrangements within the crypto ecosystem.
And if anything, TUSD's repeated de-pegging incidents may serve as a reminder of the risks associated with stablecoin stability, and the importance of thorough custodial arrangements within the crypto ecosystem.
In a tweet this week, Glassnode shared something interesting.
The on-chain and financial analytics firm noted that the stablecoin market has been contracting for 14 months, with the aggregate market capitalization (MCap) declining from a peak of $163 billion to $124 billion.
Glassnode shared that this represents a $39 billion decrease or a decline of 24%.
However, despite the contraction in demand, Glassnode says that the monthly percentage change for the stablecoin MCap has reached an equilibrium.
This, Glassnode says, may suggest that the market may be stabilizing and could be poised to enter a period of expansion.
Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.