Under the test of volatility, can RWA withstand the pressure?
Written by: Pzai, Foresight News
RWA stablecoins, as a recent hot narrative, have introduced a fresh source of growth into the stablecoin domain backed by off-chain assets and opened up enough imaginative space for investors. Among them, the representative project Usual has also gained market favor, rapidly attracting over 1.6 billion USD in TVL. However, the project has recently encountered certain challenges.
On January 9, the liquid staking token USD0++ within its project suffered a sell-off after the Usual announcement. In the RWA stablecoin camp, some players are also experiencing varying degrees of decoupling, reflecting the shift in market sentiment. This article analyzes this phenomenon.
Mechanism changes
USD0++ is a liquid staking token (LST) with a staking period of 4 years, similar to a '4-year bond'. For each USD0 staked, Usual will mint new USUAL tokens in a deflationary manner and distribute these tokens as rewards to users. In Usual's latest announcement, USD0++ will transition to a lower limit redemption mechanism and offer conditional exit options:
Conditional exit: 1:1 redemption, requiring the confiscation of a portion of USUAL earnings. This part is planned to be released next week.
Unconditional exit: redeem at a base price (currently set at 0.87 USD), gradually converging to 1 USD over time.
In the context of volatility in the cryptocurrency market, fluctuations in market liquidity (for example, the underlying asset of RWA—U.S. Treasury bonds—has recently been discounted) combined with the implementation of mechanisms have dampened investors' expectations. The USD0/USD0++ Curve pool was quickly sold off frantically by investors, with a pool deviation degree of 91.27%/8.73%. The APY for USD0++/USD0 lending pool on Morpho also soared to 78.82%. Before the announcement, USD0++ had long maintained a premium model over USD0, possibly because it offered a 1:1 early waiver option during pre-trading on Binance, maximizing the airdrop benefits for users before the protocol launch. After the mechanism was clarified, investors began to flow back into the more liquid local currency.
This event had a certain impact on USD0++ holders, but most USD0++ holders were attracted by USUAL incentives, have held for a long time, and the price fluctuations did not drop below the base price, which manifested as panic selling.
Possibly affected by this event, as of the time of writing, USUAL has also fallen to 0.684 USD, with a 24-hour decline of 2.29%.
Gradual fluctuations
From a mechanistic perspective, USUAL may have the process of re-anchoring the yields of USD0++ through USUAL tokens in the future (by burning USUAL to drive up the token price, thereby increasing the yield while attracting liquidity back). During the process of RWA stablecoins attracting new liquidity, the role of token incentives is also self-evident. The mechanism of USUAL lies in rewarding the entire ecosystem of stablecoin holders through USUAL tokens, anchoring while maintaining stable gains. In a volatile market, investors may need liquidity to support their positions more, further exacerbating the volatility of USD0++.
Besides Usual, another RWA stablecoin, Anzen USDz, has also long experienced a decoupling process. After October 16 last year, possibly influenced by an airdrop, the token continued to experience a selling wave, briefly dipping below 0.9 USD, which weakened potential returns for investors. In fact, the Anzen protocol also has similar functions to USD0++, but the overall staking scale is less than 10%, which limits the impact of selling pressure, and its single pool liquidity is only 3.2 million USD, far less than USD0's nearly 100 million USD liquidity in a single pool on Curve.
From a business model perspective, RWA stablecoins also face many challenges, including how to balance the relationship between token issuance and liquidity growth, and how to ensure the growth of real yields synchronizes with on-chain activities. According to Bitwise analysis, most RWA assets are U.S. Treasury bonds, and the concentration of asset distribution also exposes stablecoins to some impacts from U.S. Treasury bonds. How to build mechanisms or reserves to resist these impacts has become a direction worth considering.
For stablecoin projects, they seem to have fallen back into the 'mine-sell-withdraw' cycle from the DeFi Summer period. Although this model can attract a large number of users and funds in the short term through high token incentives, it fundamentally does not solve the problem of long-term value creation for the protocol, and it is easy to lead to continuous declines in token prices due to excessive selling pressure, ultimately damaging user confidence and the healthy development of the project ecosystem.
To break this cycle, project parties need to focus on the long-term construction of the ecosystem by developing more innovative products, optimizing governance mechanisms, and strengthening community participation, gradually building a diversified and sustainable stablecoin ecosystem rather than merely relying on short-term incentives to attract users. Only through these efforts can stablecoin projects truly break the 'mine-sell-withdraw' cycle, bringing real yields and strong liquidity backing to users, thus standing out in a competitive market and achieving long-term development.
