Written by: darkforest
On the third anniversary of 3.12, the cryptocurrency circle did not give us a peaceful day to lick the pain three years ago. As the so-called happy families are all alike, every unhappy family is unhappy in its own way. At such special moments, I always pay attention to the stablecoin market to see if they can really anchor the value at critical moments, especially whether the performance of decentralized stablecoins under extreme market conditions is satisfactory, Keep the wealth for us.
Compared with the lack of transparency of USDT, USDC, as a stablecoin jointly issued and managed by Circle and Coinbase, has been widely recognized and supported by regulatory agencies for compliance, and has the potential to surpass USDT’s market share. I think that before this decoupling incident, few people could have imagined that Circle could still be trapped by the extremely strict supervision of Bank of America.
USDC has done a lot in terms of compliance:
KYC/AML: USDC users must complete the real-name authentication (Know Your Customer) and anti-money laundering (Anti-Money Laundering) procedures to comply with financial regulatory requirements.
Audit report: Circle, the issuing company of USDC, is regularly audited by third-party auditors to verify its 1:1 USD-pegged cash reserves and ensure continuous transparency.
Financial regulatory support: USDC is supported and recognized by multiple regulatory agencies, such as the US financial regulator FinCEN and the New York State Department of Financial Services.
Open Compliance Framework: Circle made its compliance framework public to help other cryptocurrency companies and the community reference and practice.
However, none of this could avoid the panic and stampede that occurred in the currency circle yesterday. USDC, the most compliant stablecoin in the currency circle that has been issued for 4 years, has been reduced to the point where it needs to rely on USDT to escape.
It is unbelievable that 2 million U of 3CRV was exchanged for 0.05 U. Such an unimaginable and extremely tragic accident. I don’t think this will happen in the peaceful days, and most of the so-called stable coins They all lost the stability of the past, and at this moment, blood flowed like rivers. But only moments like this can remind us of what kind of stablecoins we really need.
Let’s take a look at the logic chain of each stablecoin depeg:
1. USDC Due to the thunder of Silicon Valley Bank, some cash deposits may not be withdrawn, causing panic discounts, and USDC is decoupled.
2. As the largest liquidity pool in the stablecoin market, 3pool on Curve has always been the pool that bears the most direct impact of stablecoin risks. Originally, the risk of USDC can be shared by DAI and USDT,
However, since USDC accounts for a large proportion of DAI’s collateral, which may exceed 60% at present, the decline in the value of collateral will naturally affect the stability of DAI.
To make matters worse, because makerDAO has a PSM module (PSM allows users to use USDC, GUSD, etc. to directly purchase or redeem DAI tokens with a 1:1 value from the debt pool in the MakerDAO system), a huge amount of USDC passes through the PSM module The exchange is called DAI to escape, and the combination of the two naturally leads to DAI being smashed along with USDC.
From the makerburn data, it can be clearly seen that the DAI created by USDC inflows in the last 24 hours has reached nearly 1 billion US dollars.
3. The decentralized stablecoin FRAX, which is second only to DAI, is a stablecoin generated by accepting USDC as collateral at a collatral ratio of 92%. Therefore, when the value of the collateral is insufficient, FRAX as a part of the collateral will only fall more than DAI worse.
4. The relatively large centralized stablecoin BUSD, because Binance directly suspended the automatic conversion between USDC and BUSD, the risk was isolated and there was no decoupling.
5. The TUSD issued by TrustToken is somewhat similar to USDC. It is also regulated by the US Financial Industry Regulatory Authority (FinCEN) and complies with the US AML and KYC regulations. It is very rare and has not been greatly impacted.
6. There are also some similar centralized stablecoins USDP, GUSD, etc. are not so lucky, and there is also decoupling.
7. Further down, the USDD of Sun Cut is not very stable at ordinary times, and whoever uses it is stupid, let alone.
8. LUSD, an S-level decentralized stablecoin, fell to 0.98 shortly after the panic started, but it is a good thing for LUSD holders, because it means that the market provides you with an arbitrage opportunity of 2 points at this time. Seeing that the price has recovered, what is the top decentralized stablecoin, the holder does not panic when things happen, and can make a profit at the right time, this is the real top.
9. Look at the situation of several other decentralized stablecoins. The over-collateralized stablecoins ALUSD, MIM, and DOLA have not been able to withstand this wave, and are still depeg.
10. The sUSD of synthetic asset synthetix has not yet returned to the anchor.
Looking at the USDC decoupling incident, it has caused unprecedented panic and crisis in the stablecoin market in the currency circle. A large number of centralized stablecoins and almost all decentralized stablecoins have been unanchored in an instant. Large U.S. banks are short of cash flow and run because of buying U.S. treasury bonds.
It has to be said that the evolution of the blockchain technology constructed by Satoshi Nakamoto has not been able to partially replace the current financial system, but has deeply buried this time bomb in DEFI. Such a financial system that lacks resilience and anti-fragility Can we still call the system “decentralized finance”?
When a financial crisis like that in 2008 occurs again in our world, can we be full of contempt and ridicule for this world like Satoshi Nakamoto wrote in the Bitcoin creation block, and have confidence in this technology that can protect our wealth? What are you looking forward to?