Recently, the stablecoin USD0++ has experienced a price decoupling event, and the market was once in panic. However, this crisis is not without warning. In fact, it is an inevitable challenge for the project development to transition from the promotion period to the stable period. This article will combine official announcements and market reactions to analyze the reasons behind decoupling and possible future development directions.
(All the way up after being officially launched on Binance, analyze the token economy of the Tether-USUAL protocol on the chain and the logic behind it)
USD0++ Reason for decoupling: 2/1 charges for exit, causing market turmoil
Usual officially announced recently that it will charge an exit fee for USD0’s liquidity pledge token USD0++ starting from February 1, 2025, and has established a guaranteed exchange rate of 0.87 to stabilize the market. However, this announcement unexpectedly triggered market panic. Many highly leveraged users sold USD0++ to avoid liquidation, causing the price to fall to 0.91.
Twitter KOL @BroLeonAus believes that the 'minimum redemption rate of 0.87' mentioned in the announcement was originally intended to give the market confidence, as it is above the liquidation line of the lending platform Morpho (0.86). However, some market participants interpreted this as a signal that the officials might allow the price to fall within that range, further exacerbating panic. This phenomenon indicates the market's heightened sensitivity to the risks of stablecoin decoupling, especially in the historical shadow of the LUNA event.
Note: In fact, Usual's official documents show that the minimum redemption rate reflects the expected income to be received before the maturity of USD0++, calculated using the Federal Reserve's interest rate, defined by humans.
Morpho's liquidation line amplifies Usual's panic sentiment, raising doubts about the announcement changes.
Twitter KOL @DefiIgnas and other community members stated that the minimum redemption rate of 0.87 was a later change, rather than the original 1:1 redemption.
Twitter KOL @BroLeonAus believes that some investors left the market due to media reports and community warnings about potential liquidation risks. A massive sell-off further depressed the redemption price, creating a panic cycle. He pointed out that this wave of panic did not stem from significant issues with the project's fundamentals but was rather an overreaction to uncertainty in the transitional period. Additionally, the deleveraging behavior of high-leverage traders is one of the core driving forces behind this decoupling. As the exit fee policy is clarified, market sentiment is expected to gradually recover.
Usual's Explanation of the USD0++ Exit Mechanism
Early Stage: No Bottom Price Test
The initial phase of USD0++ allowed users to freely mint and trade, with the protocol testing market demand and liquidity through verification designs.
Transitional Period: 1:1 Redemption Guarantee
To promote the market, the protocol introduced a 1:1 unconditional redemption mechanism, providing additional liquidity guarantees.
Final Stage: Dual Exit Mechanism
The current USD0++ offers two exit options to meet different needs:
Conditional Exit: Users can redeem early at a 1:1 ratio but must forgo some future earnings.
Unconditional Exit: Redeem at a base price (currently 0.87 USD0), gradually converging to 1 USD in the future while retaining prepaid rewards.
The community has not yet escaped the shadow of LUNA/UST.
The decoupling turmoil of USD0++ highlights that on-chain stablecoin projects are still overshadowed by the LUNA/UST incident, leading to significant distrust regarding the decoupling of stablecoins and their stabilization mechanisms. Additionally, many investors who adapted to the 1:1 redemption guarantee suddenly felt deceived when the exit mechanism was restructured differently, causing market fluctuations. Investors should closely monitor the upcoming details on exit fees and early unlocking mechanisms and make rational decisions based on their risk tolerance to maximize profit potential.
This article USD0++ Decoupling Turmoil: Exit Restructuring Causes Panic, Challenges USUAL Economic Mechanism to the Market was first published on Chain News ABMedia.