The TUSD market is in the red turf. TrueUSD (TUSD), a dollar-pegged stablecoin, is trading at a discount to its counterpart tether (USDT) on Binance.US, Binance’s US subsidiary. While the Bitcoin and crypto markets have been incredibly positive in recent days as a result of spot ETF news, gloomy clouds are building over the market once again. Will this be another crypto winter?
The latest crypto drama could be the stablecoin TrueUSD (TUSD), which has recently lost its peg to the US dollar. The context is the most recent PrimeTrust discoveries and concerns regarding the stablecoin’s complete reserve backing.
TUSD loses its peg to the US dollar
At the time of publication, the TUSD/USDT pair was trading at 99 cents on Binance.US, having reached a low of 80 cents on Wednesday, according to data from the charting platform TradingView. The pair traded for approximately $0.9980 on Binance.
The volatility of stablecoins, which have evolved as financing currencies over the past three years, frequently feeds into the market as a whole. So far, TUSD’s volatility has had no effect on the broader market, with bitcoin (BTC) continuing to trade within familiar ranges above $30,000.
TUSD, with a market cap of $3 billion, poses a lower systemic risk to the market than Tether, which has a market cap of $83 billion. The adverse volatility of TUSD on Binance.US comes hours after the token’s reserve report revealed the project held $26,000 in assets backing the stablecoin at a U.S. depository entity that had been instructed to cease withdrawals.
Red flags surrounding the present TUSD market
TrueUSD has been criticized for its lack of transparency for a long time. According to speculation, TrueUSD is owned by Tron founder Justin Sun. Still, the official emitter (Techteryx) denies this and has threatened to file a defamation lawsuit against those who make such claims. They also reference the real-time reserve statement provided by Chainlink and banking partners.
However, the prospect of legal action cannot prevent critics from questioning TrueUSD’s corporate structure and demanding accountability. The USD reserves of the $3.15 billion stablecoin are vital to the market stability of all cryptocurrencies. The crash of Do Kwon’s Terra is a true and tested example of what will happen to the crypto market if another stablecoin depegs.
Adam Cochran, a partner at Cinneamhain Ventures, is the most vocal opponent of TrueUSD. Today, the expert raised multiple red flags in a Twitter thread. According to Cochran’s research, the auditor certifying the USD audits at Prime Trust is the former FTX auditor who reopened shop under a different name following the FTX debacle.
The Analyst goes on to point out that TUSD’s chain oracle, which is in charge of validating reserves, is made up of only 17 separate nodes, all of which come from the same source, with this one corporation releasing only one number.
The analyst also identifies the alleged inability to redeem TUSD as a red flag. According to Cochran, several individuals who attempted to redeem the token had their tokens returned to the chain. A few individuals who successfully redeemed their tokens on Binance claim to have received USDT instead of USD.
A former employee of TrustToken, the company that created TrueUSD before selling it to Asian conglomerate Techteryx, has reportedly stated that he has proof that users are not able to redeem USD and are instead directed to move it to Binance and sell it there.
Concerns rise following Prime Trust fiasco
Early this month, traders placed bearish bets on TUSD after suspicions that the stablecoin project mints and redeems tokens through the controversial crypto service provider Prime Trust. TrueUSD later confirmed that it is not exposed to Prime Trust.
Moreover, the recent revelations regarding Prime Trust cast further doubt on TrueUSD’s reserves. Recent documents indicate that Prime Trust’s losses trace back to 2021. In 2021, Prime Trust allegedly lost access to legacy wallets and used customer funds to purchase back crypto.
The trust’s total liabilities amount to $150 million. Prime Trust owes its consumers $85,670,000 in fiat currency but only has $2,904,000 in its possession. In crypto, the custodian owes its clients $69,509,000 but only has $68,648,000 in assets.
