Stablecoin DEI has lost its peg of $1 for the second time within a month. The stablecoin is trading at $0.419118 with a 24-hour trading volume of $1,468,752, data from CoinMarketCap showed.
It is worth noting that the recent crypto crash was triggered by the de-pegging of TerraUSD or UST, which is an algorithmic stablecoin by Terraform Labs, a crypto company based out of South Korea.
Terraform Labs’ non-profit arm, Luna Foundation Guard was the largest holder of Bitcoin and also had reserves of other cryptocurrencies like Ether, BNB, AVAX, and others which they dumped in the markets to stabilise their native tokens TerraUSD and Terra Luna (now known as Luna Classic, LUNC).
This begs the question; will the de-pegging of DEI also cause a similar crash in the crypto markets?
Background
DEI is a complex algorithmic fractional-reserve cross-chain stablecoin with a native bridge connecting all chains within the DEUS ecosystem.
The stablecoin DEI is not listed on any centralised exchanges. The cryptocurrency can only be traded on decentralised exchanges like Uniswap (V2), QuickSwap, OpenOcean, Solidly, and Beethoven X.
Moreover, the trading volume of the cryptocurrency is also extremely low, as compared to the trading volume of other stablecoins like USDT Tether, USDC, DAI, or BinanceUSD.
Also, unlike the Luna Foundation Guard, DEUS Finance, the organization that mints the stablecoin DEI, does not have enormous holdings of other cryptocurrency tokens.
Expert’s take
Sharat Chandra, crypto expert and vice president, Research and Strategy at EarthID told Business Today, “DEI has lost its peg twice within a month. On May 16th, DEUS Finance did announce a few mitigation measures to restore the peg and ensure long-term stability, but it did not prevent de-pegging. To get DEI to a 1:1 backing with a basket of assets, the sale of DEUS Treasury bonds,(USDC, DAI, FRAX) in exchange for collateral was proposed.”
Chandra also shed light on how cryptocurrencies, especially stalecoins have come up on regulators’ agendas after the recent crypto crash.
He said, “After the UST debacle, the stability of stablecoins has been on regulators’ radar. DEI’s de-pegging will further fuel the discourse against non-collateralized stablecoins and fractional reserve stablecoins.”
Speaking of how DEUS Finance and DEI can avoid such incidents in the future, the crypto expert said, “ Terra2.0 has proposed a collateralized model for the Terra token. DEI might likely go the over-collateralisation way to avoid de-pegging in the future.”
Finally, when asked if this stablecoin de-pegging incident might also trigger a crypto crash, Chandra said, “Unlike UST, a domino effect is ruled out this time. Market sentiments are different.”
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