DEI - Another Stable Coin On It's Death Bed
Welcome to retardville, where people have more brains than sense and end up with a few cents where there used to be a few dollars. Yet another fatal flow for all things shitcoin, as the dream of trying to create a stabelcoin backed by cotton candy, unicorn farts, and gumdrops along a razor-thin order book fails dismally.
It looks like Terra has opened up for fellow algo stablecoins to collapse and the latest victim is DEI a Fantom-backed stablecoin, which has lost as much as 46% of its value.
Now a stablecoin can move up and down around it's peg, we've seen this before, 1,2 or even 10% deviation has seen stablecoins recover but as soon as a stable coin breaks up or down from the peg at a rate higher than 30% has in previous examples been a death blow. It seems its all but a kill shot for the project and you can hang it up and start applying for jobs at McDonalds, you're done.
How does DEI back itself?
DEI, valued at over $62 million by market cap, operates within Deus protocol similar to the way Bean Finance worked,a stablecoin that also went down recently. Deus is a Fantom-based DeFi (Destructive Finance) project. The DEI stablecoins minted from the protocol are backed by 10% DEUS native horse shit tokens and 90% in other stablecoins.
Prior to the Luna blow up, you could mint stablecoins off the back off a napkin you picked up at a truck stop and people would accept it no questions asked, now that investors were burned, they're actually starting to pay attention and liquidity providers are running for the exit.
So how did it break?
The collateral ratio of DEI is constantly monitored via arbitrage bots, which continually trade $1 worth of the underlying tokens for 1 DEI but as traders start to get out of riskier trades to move back to centralised stable coins like USDT and USDC the amount of liquidity in the protocol dries up. Lower prices mean more pressure on that backing for your minted stablecoin and the bots cannot keep up with the sell pressure and the peg breaks.
This is not the first time Deus Finance made headlines, just a month ago it was exploited for 14 million through a flash loan attack
Once the peg broke the DEI stable coin has been in free-fall to hit a low of 56 cents and trending toward zero.
Deus Finance token
While Deus has only lost 10% of its value so far its $22,901,250 might not be enough if people stop dumping. Even at a 10% ratio, of debt backing to the stablecoin, if enough people panic, they won't care about slippage and drain the liquidity putting more pressure on the pool of funds to back a broken stable coin.
Fantom taking a knock
While this looks to be a controlled demolition now within the protocol and a stablecoin no one uses, it will affect the Fantom protocol as people bolt for the door, anything attached to a failing project like this will see it take a knock.
The price may increase in the short term as people move through the lays liquidating into the base asset of the chain, but that is short-lived as traders look to move into other assets or hold issued stablecoins instead.
Movements like this tend to catch novice traders off guard thinking their is a recovery and they'll only run in to catch a falling knife in the process.
So hows that stablecoin'ing going for you shitcoiners? Lol 3 down in 3 months, how many more times do you need to learn the same lesson.
Have your say
What do you good people of HIVE think?
So have at it my Jessies! If you don't have something to comment, "I am a Jessie."
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