Whale sell-off challenges USD0 peg stability
The Usual protocol stated that on January 1st at 7:00 AM UTC, the Usual protocol encountered an unexpected stress test. A whale executed a large-scale trade in the secondary market, triggering a significant sell-off of USD0, raising concerns about its $1 peg. The price of USD0 briefly fell to $0.99 but quickly recovered within seconds, despite some basis point deviations during the continued sell-off. Hours later, USD0 fully recovered to its pegged price of $1.
USD0: Long-term stable market peg
The Usual protocol stated that compared to similar stablecoins like FDUSD, PYUSD, and USDe, USD0 is more reliable, as the latter often trades slightly below $1. Today's event, although a rare stress test, once again validated the resilience of the USD0 design.
1:1 collateral redemption mechanism ensures stability
The Usual protocol reiterates that the core of USD0's stability lies in its ability to be redeemed for underlying collateral at a 1:1 ratio. This process is driven by smart contracts and is currently only open to whitelisted users. However, the Usual team is working towards implementing a permissionless collateral redemption feature and conducting rigorous audits to ensure this transition is completed without compromising security and solvency.
Diversification enhances secondary market liquidity
The Usual protocol stated that the resilience of USD0's secondary market liquidity benefits from its collaboration with tokenized real asset (RWA) issuers. The Usual protocol carefully selects highly liquid collateral, such as USYC, and further diversifies its asset choices, including M by M^0, USDTB from Ethena, BlackRock BUIDL launched by Securitize, and OUSG issued by Ondo. This diversification strategy ensures that USD0 can be redeemed within the same day (T+0) and relies on highly liquid short-term money market instruments for support.
First major stress test demonstrates resilience
Despite the pressure from whale trading, the peg of USD0 quickly recovered, accompanied by ample immediate liquidity available for arbitrage opportunities. Notably, the redemption volume during this stress test exceeded the total locked value (TVL) of other stablecoins (e.g., GHO) within hours, yet the system continued to operate efficiently.
This article 'Whale trading triggers temporary drop of USD0, Usual protocol: has stabilized' first appeared in Chain News ABMedia.
