Today, almost all major stablecoins de-pegged from their basic currencies, here’s why
Traders are aggressively shifting their funds to stablecoins as the Alameda/FTX/Binance play enters its most dangerous phase. However, even USD-based assets today are far from being “safe haven” assets.
USDT down, USDC, BUSD up: Unmatched volatility in stablecoin segment
Today, Nov. 10, 2022, traders and analysts noticed unusual activity on Curve Finance (CRV) and Aave (AAVE) pools. Alameda Research allegedly started “shorting” U.S. Dollar Tether (USDT), the largest stablecoin, by swapping borrowed USDT to USD Coins (USDC) by Circle.
This monstrous activity immediately created an imbalance in the USDT peg: the asset fell below $0.98, the lowest level since the May collapse of USDT. Conversely, USDC “moved up” to $1,007. This imbalance opens up dangerous arbitrage opportunities.
Then, Tether Limited, an operator of USDT, blocked the FTX-backed address with over $46 million in the largest stablecoin. This restriction was registered by automated tracking services.
Binance’s stablecoin, BUSD, benefited the most from this panic: as USDT holders started converting their funds to BUSD, the price rose to over $1,012.
Decentralized stablecoins USDD, FRAX affected as well
Even EUR-pegged stablecoins suffered from the ongoing euphoria. Eurocoin (EUROC) by Circle jumped over €1.04 on major spot exchanges, according to CoinGecko.
By far the worst victims of this drama are decentralized stablecoins. USDD, an algorithmically-backed stablecoin by the Tron (TRX) ecosystem, fell briefly to $0.968. Justin Sun immediately injected fresh liquidity into a basket of assets backing USDD.
Frax Finance (FRAX), the smallest hybrid stablecoin with a $1+ billion capitalization, slid below $0,966. Both USDD and FRAX are still trading below $1 as of press time.
