On Monday, the price of the stablecoin TrueUSD (TUSD) soared, reaching above $1.2 on Binance before returning to normal. What could have happened to cause this depeg?
The price of the TUSD stablecoin temporarily soars
On Monday, May 1, the price of the stablecoin TrueUSD (TUSD) experienced some jolts, seeing its price temporarily lose its peg to the dollar. Where stablecoin depegs tend to be the talk of the game when they come on the downside, this time it was quite the opposite and the asset even went until showing a price of more than 1.2 dollars on Binance.
An analysis by Kaiko even shows that the TUSD/USDT pair has become the most liquid pair on Binanceafter a massive injection of liquidity into the order book of $200 million at that time:
Figure 2 — Liquidity in the TUSD/USDT order book on Binance
In lending and borrowing markets such as Compound and Aave, reserves of TUSD were drained by borrowers. Interest rates have also temporarily exceeded 100%as shown by data from Aave V2 on the morning of May 1:
Figure 2 — Interest rate for borrowing TUSD on Aave V2
👉 To go further — What are the different types of stablecoins and how do they work?
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What happened ?
While no particular announcement has been made regarding the stablecoin itself, it is therefore worth asking what may have caused this sudden attraction for the TrueUSD.
The answer is on the side of the Binance Launchpad for Sui and its token of the same name. Indeed, the community expected an airdrop from the Sui teams, like what Aptos (APT) had done for example. But it was instead decided to issue SUI in the form of incentives to the various blockchain protocols.
While the network was launched in mainnet on April 30, a distribution of its token on Binance through the Launchpool aroused enthusiasmgiven that it was not yet open for trading and therefore had no price.
As we could see on Monday through the warning that Changpeng Zhao (CZ) sent to Justin Sun, TUSD was among the assets that could be deposited in the Launchpool. Investors then jumped on the stablecoin, with the hope of realizing a capital gain in SUI.
However, the TUSD is a stablecoin much less capitalized than competitors such as USDC or USDTwhich makes it potentially more volatile when volumes increase.
To date, it sits at the 32nd position on CoinGecko, with just over $2 billion in market capitalization. As an indication, there were nearly 575 million TUSD deposited in SUI Launchpool at the time of writing Monday’s article, i.e. nearly 29% of the capitalization of the stablecoin.
While the asset’s price has returned to its original price, it will simply have struggled to absorb the sudden surge in demand.
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Sources: Kaiko, Aave
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I timidly discovered the world of blockchain at the end of 2018 during my quest for financial freedom. Initially invested moderately, it was only two years later that I took the gamble of betting everything on the movement that was taking shape then. I then dedicate 2021 to training myself better to acquire more knowledge and seriousness. As I often like to say: I still have a billion things to learn. And what I do know, I want to share with you.
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