Another so-called stablecoin fell from its dollar peg this week, adding to broader fears about the digital assets’ viability.
According to Coinbase statistics, DEI, which is utilised as a collateral mechanism for third-party securities developed on the Fantom decentralised finance protocol Deus Finance, plummeted to 52 cents – a record low – before recovering to slightly above 59 cents on Wednesday. Deus’ market value has also dropped from $100 million to around $52 million.
A stablecoin is a digital currency whose value is linked to a reliable reserve asset, such as the US dollar or gold. Stablecoins are intended to provide a more stable investment choice than unpegged cryptocurrencies such as bitcoin or ether, which are extremely volatile.
Terra Collapse Consumed 3% of Crypto Capacity
The TerraUSD stablecoin went bankrupt last week. The current market drop was too much for a computer system that makes and destroys stablecoins to keep the peg in balance.
In a letter, Ark Invest analyst Frank Downing commented, “Terra’s fall is one of the greatest fiascos in crypto-market history.” According to him, Terra’s demise devastated nearly 3% of the overall market worth of cryptocurrency.
The crypto market valuation is presently $1.38 trillion, a long cry from the $3 trillion hit in November.
“This is a tragic destruction of riches, and many people have been affected, but… there is still huge possibility ahead,” Downing later tweeted. “Crypto will survive and become stronger as a result.”
Lafayette Tabor, CEO of Deus Finance, stated that the DEI peg will return.
On Monday, Deus tweeted, “Our team is working around the clock to restore the DEI peg.” “Mitigation measures were quickly adopted, and long-term stability solutions are being researched.”
“The stablecoin market was rattled by the collapse of [TerraUSD],” Tabor remarked. “We believe that a confident peg at $1 with fully collateralized support is the only solution to short-term peg stability.”
He stated that the objective was to restore the DEI to a 1:1 peg with a basket of assets. “We will do this by exchanging DEUS Treasury bonds for collateral.”