Another Stablecoin Bites The Dust?
As if the UST and LUNA mess wasn't bad enough and sent off shockwaves into the markets and really put a lot of people on edge. That panic took us into what was one of the hardest sell offs along with the combination of the FED and the stock market sell off really sent big shockwaves into crypto.
But that's not all another not as well know stable coin also crash and still has not regained it's peg. That stablecoin is called DEI.
IMPORTANT: Just because something is called a stablecoin does not mean it's actully back by anything if it should ever fall off the peg. These so called "stablecoins" simply try there best to hold a stable price. It could go higher and it could go lower.
What Is DEI
DEI is a cross chain liquidity with a fractional reserve stablecoin. It's made up of 10% DEUS tokens and 90% of it is invested into other stablecoins. That's a pretty dangerous thing when you think about it. It most likely had a decent amount of UST in which that sell off crushed the price. If your stablecoin is based on other stablecoins well you are now simply trusting that these other stablecoins hold there peg. If they don't yours is screwed! Seems like a not so great way to launching your own stablecoin and honestly down right lazy.
Over Collateralization
One of the big things we have noticed with other stables is they require over collateralization. In the effect of What is DAI stablecoin you'll notice that the collateralization on that is 150% which means the value of the asset or tokens added need to be 150% the value of the DAI taken out.
A solid write up on how DAI get's its value can be found on this Medium article here Cross Chain Liqudity for fraction reserve stablecoin in short though it's getting its value from various liquidity pools and other chains.
At the time of writing this DEI trades for $0.63
If you take the peg loss of this one vs UST you see they actully don't match up at all which means this spells even more troubles for this stablecoin. With a market cap of just 46 million it very well could be being manipulated by some big players.
UST lost its peg on May 9th while DEI lost it on May 15th nearly a full week after UST and LUNA crashed. If we look at the total stablecoin market it now makes up 162 billion or what is roughly a little over 10% of the entire crypto market. It's a place I honestly don't like seeing us as it feels like real cryptos are being phased out and taken over by these so called stables. We also see running down the list of stables that there are others struggling to hold their pegs. some at $0.97 others at $1.05 even more at $0.72 and $0.82 what really cracks me up is for some reason HBD is not on coingeckos list of being a stable coin listing which I don't understand.
HBD is currently at $1 and I have to say through all the wild and weirdness over the last two weeks it's actully don't a fairly decent job compared to some of these others. Now I say that with a grain of salt because if anyone with some deep pockets wanted to screw with HBD they honestly could. Thus that's why a larger market cap and continues advancements need to be made in crypto as a whole. Personally I'd love to see us get off of the pegged stablecoin and instead go back to the value of the crypto tokens.