USDR Stablecoin Depegs Due to Liquidity Issue
The USDR stablecoin, which is backed by real estate and other cryptocurrencies, lost its peg on October 11th, dropping to $0.53 per coin. This was a result of a run on the stablecoin after the USDR treasury was drained of liquid assets. The team behind the project clarified that the depegging was solely due to a liquidity issue and reassured investors that redemptions would be supported using the remaining assets.
Details of the Depegging
According to an update from the Tangible Protocol team, the USDR stablecoin depegged as a rush of redemptions led to the depletion of liquid assets in the treasury, including DAI. The stablecoin is primarily traded on the Pearl decentralized exchange (DEX) on Polygon. The team explained that all the liquid DAI from the USDR treasury was redeemed in a short period, resulting in a significant drawdown in market capitalization.
“Over a short period of time, all of the liquid $DAI from the $USDR treasury was redeemed. This led to an accelerated drawdown in the market cap. Combined with the lack of DAI for redemptions, panic selling ensued, causing a depeg. We’re working on solutions, which we’ll share shortly. In the meantime, this is a liquidity issue. The real estate and digital assets backing $USDR still exist and will be used to support redemptions. Review the Transparency Program in our project docs for substantiation on the real estate backing $USDR.”
Currently, the USDR treasury holds no DAI but has a $6.2 million insurance fund to cover a circulating supply of 45 million USDR worth $45 million.
Analyzing the Depeg
Market data reveals that the USDR stablecoin experienced a flood of selling around 11:30 a.m. UTC, causing it to lose its peg and drop to as low as $0.50 per coin before partially recovering to $0.53. The project developers assure investors that they are actively working on solutions and emphasize that the depeg is a temporary liquidity issue affecting redemptions.
“This is a liquidity issue. The real estate and digital assets backing USDR still exist and will be used to support redemptions.”
Despite the loss to the treasury, the Tangible Protocol’s website states that its assets are valued higher than the entire market capitalization of the coin.
Collateral Backing USDR
The USDR stablecoin is backed by 14.74% Tangible TNGBL tokens, which are part of its native ecosystem. The remaining 82.2% is collateralized by real-world housing and an insurance fund. Stablecoins aim to maintain a value of $1, but they can lose their peg during extreme market conditions.
Other stablecoins like Circle’s USD Coin and Terra’s UST have also experienced depegging in the past but eventually recovered or sustained significant losses, respectively.
Hot Take: Maintaining Confidence Amidst Liquidity Challenges
The depegging of the USDR stablecoin highlights the importance of maintaining sufficient liquidity to support redemptions and sustain confidence in stablecoins. While this incident may cause temporary concern among investors, it’s crucial to remember that the real estate holdings and digital assets backing USDR still exist and will be used for redemption support. The Tangible Protocol team’s commitment to finding solutions indicates their dedication to resolving the liquidity issue and restoring stability. As with any stablecoin, market conditions can impact pegs, but transparent communication and proactive measures are essential in mitigating risks and rebuilding trust.
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