Amidst concerns of undercollateralization and significant selling pressure, TrueUSD (TUSD), a stablecoin linked to Justin Sun, has seen its value drop below its intended $1 peg. The depegging event occurred around January 15, 11:00 am UTC, with TUSD plummeting to as low as $0.984 by 11:15 pm. Currently, TUSD is trading at $0.988, representing a 1.3% deviation from its $1 target.
Heavy selling on Binance
The depegging of TrueUSD coincided with an unusual surge in trading volume on the cryptocurrency exchange, Binance. Over the past 24 hours, traders have offloaded more than $339.2 million worth of TUSD, while buy orders amounted to only $296.8 million, resulting in a net outflow of $42.3 million.
Concerns surrounding TrueUSD’s stability emerged when reports suggested that the stablecoin faced difficulties providing real-time attestations of its reserves. This raised suspicions that TrueUSD might have been undercollateralized.
According to a report by Protos, the system experienced multiple errors with its API, rendering it unable to supply an accurate U.S. dollar value for its collateral assets.
The issues with TrueUSD came to light when a pseudonymous user, Rho Rider, drew attention to the potential arbitrage opportunity involving TUSD.
In a December 16 post, Rho Rider highlighted that TUSD was trading nearly 8% below its peg at $0.92 on Poloniex while its price remained stable at around $0.99 on Binance. This discrepancy prompted Rho Rider to question why no one took advantage of the nearly 10% arbitrage opportunity.
Concerns in the stablecoin market
The depegging of TrueUSD underscores the challenges and risks associated with stablecoins. Stablecoins are designed to maintain a stable value by being pegged to a specific asset or currency, often the US dollar. When a stablecoin deviates from its peg, it can create uncertainty and erode user trust.
Stablecoins like Tether (USDT) have recently faced scrutiny and regulatory challenges due to their backing and transparency concerns. The incident with TrueUSD highlights the importance of robust auditing and transparency in the stablecoin ecosystem to ensure stablecoins can maintain their peg and give users confidence in their value.
Market reaction
The recent depegging of TrueUSD has drawn the attention of traders and investors in cryptocurrency. Many are closely monitoring the situation and assessing whether it will have broader implications for the stability of other stablecoins.
The cryptocurrency market is known for its volatility, and events like these can lead to increased uncertainty and price fluctuations. Traders and investors are advised to exercise caution and conduct thorough research before engaging with any stablecoin or cryptocurrency in the current market environment.
