The real estate-backed USDR stablecoin lost its peg on the 11th of October, falling to $0.53 per coin, after the USDR treasury was drained of all its liquid assets, leading to a run on the stablecoin.
The team explained that the de-pegging was only due to a liquidity issue and that the real estate holdings and other digital assets would be used to support redemptions.
USDR Depegs
According to an update from the team behind the project, the USDR depegged after a rush of redemptions led to the treasury being drained of liquid assets such as DAI. The USDR stablecoin is backed by a mixture of real estate holdings and other cryptocurrencies. It is issued by the Tangible Protocol, a decentralized finance (DeFi) project that aims to tokenize housing and other real-world assets. The stablecoin is primarily traded on the Pearl decentralized exchange (DEX), which runs on Polygon.
The team behind the stablecoin issued an update on the 11th of October, explaining how all the liquid DAI from the USDR treasury was redeemed over a short period of time. This led to a considerable and accelerated drawdown in the stablecoin’s market capitalization. The team stated in its update,
“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.”
According to data published by the Tangible DAO, the treasury currently holds zero DAI. The only liquid assets it holds at the moment is a $6.2 million insurance fund to cover a circulating supply of 45 million USDR worth $45 million.
Analyzing The Depeg
According to the available market data, the USDR stablecoin experienced a flood of selling at around 11:30 a.m. UTC. This led to the stablecoin losing its peg, with the price dropping down to as low as $0.50 per coin before recovering slightly and rising to $0.53. Despite having lost almost 50% of its value, the developers behind the project have promised to come up with solutions for the ongoing situation. They added that the depeg was merely a liquidity issue that had temporarily hindered 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 significant loss to the treasury, the Tangible Protocol’s official website still displayed that its assets are worth more than the entire market capitalization of the coin.
Collateral Backing USDR
Around 14.74% of the collateral backing the USDR stablecoin consists of Tangible TNGBL tokens. These tokens are part of the stablecoin’s native ecosystem. According to the team, the remaining 82.2% is collateralized by real-world housing and an insurance fund. Stablecoins are designed to always maintain a value of $1 on the open market. However, sometimes they lose their peg to the dollar, especially during extreme market conditions.
Several other prominent stablecoins have also lost their peg at different times. These include Circle’s USD Coin, the 6th largest cryptocurrency in the market. The stablecoin dropped to $0.88 per coin on the 11th of March when several banks in the United States went bankrupt. The stablecoin eventually recovered and regained its peg on the 14th of March. Terra’s UST also lost its Dollar peg in May. However, the stablecoin never recovered and is currently valued at $0.01 per coin, according to data sourced from CoinMarketCap.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
