Author: Pzai, Foresight News
RWA stablecoins, as a recent hot narrative, introduce a fresh source of growth to the stablecoin field backed by off-chain assets and open sufficient imaginative space for investors. Among them, the representative project Usual has also gained market favor, quickly attracting over $1.6 billion in TVL. However, the project has recently faced certain challenges.
On January 9, the liquid staking token USD0++ in its project suffered a sell-off after the Usual announcement. Meanwhile, some players in the RWA stablecoin camp are also experiencing varying degrees of decoupling, reflecting a shift in market sentiment. This article analyzes this phenomenon.
Mechanism changes
USD0++ is a liquid staking token (LST) with a staking term of 4 years, similar to a '4-year bond'. For every 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 shift to a lower limit redemption mechanism and provide conditional exit options.
Conditional exit: 1:1 redemption, requiring the confiscation of part of the USUAL earnings. This part is scheduled to be released next week.
Unconditional exit: redeem at the floor price (currently set at $0.87) and gradually converge to $1 over time.
In the context of volatility in the cryptocurrency market, fluctuations in market liquidity (for example, the underlying assets of RWA—US Treasury bonds have also experienced some discount in recent fluctuations) combined with the implementation of mechanisms have dampened investor expectations. The USD0/USD0++ Curve pool was rapidly sold off by investors, with pool deviation reaching 91.27%/8.73%, and the APY for the USD0++/USD0 lending pool on Morpho soared to 78.82%. Prior to the announcement, USD0++ had maintained a premium model over USD0 for a long time, possibly due to the early exemption option of 1:1 provided by USD0++ during the pre-trading period on Binance, maximizing 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 has had a certain impact on holders of USD0++, but most holders of USD0++ came from USUAL incentives, held for a long time, and the price fluctuations have not dropped below the floor price, reflecting panic selling.
Due to this event, as of the time of writing, USUAL has also fallen to $0.684, with a 24-hour decline of 2.29%.
Gradual volatility
From a mechanism perspective, USUAL has the potential to anchor returns through USUAL tokens against USD0++ in the future (by burning USUAL to drive up the token price, raising yields while attracting liquidity back). In the process of RWA stablecoins pulling in liquidity, the role of token incentives is also evident. The mechanism of USUAL is to reward the entire stablecoin holder ecosystem through USUAL tokens while anchoring with stable gains. In a volatile market, investors may need liquidity to support their positions further exacerbating the volatility of USD0++.
In addition to Usual, another RWA stablecoin, Anzen USDz, has also long experienced a decoupling process. After October 16 last year, possibly influenced by airdrops, the token has continuously experienced a selling wave, once dipping below $0.9, undermining potential returns for investors. In fact, the Anzen protocol also has similar functions to USD0++, but the overall staking scale is less than 10%, limiting its impact on selling pressure, and its single pool liquidity is only $3.2 million, far less than the nearly $100 million liquidity of USD0 in Curve.
In terms of business models, RWA stablecoins also face numerous 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 RWAs assets are US Treasury bonds, and the concentration of asset distribution also exposes stablecoins to some shocks from US Treasury bonds. How to build mechanisms or reserves to resist such shocks becomes a worthy direction for consideration.
For stablecoin projects, they seem to have fallen back into the 'mine-sell-withdraw' cycle reminiscent of DeFi Summer. While this model can attract a large influx of users and funds in the short term through high token incentives, it fundamentally fails to address the long-term value creation of the protocol, and easily leads to continuous price declines due to excessive selling pressure, ultimately harming user confidence and the healthy development of the project ecosystem.
To break this cycle, the project team needs to focus on the long-term construction of the ecosystem by developing more innovative products, optimizing governance mechanisms, and enhancing community participation, gradually building a diversified and sustainable stablecoin ecosystem, rather than relying solely on short-term incentives to attract users. Only through these efforts can stablecoin projects truly break the 'mine-sell-withdraw' cycle and provide users with real, tangible returns and strong liquidity backing, thus standing out in a competitive market and achieving long-term development.
