USDN drops further after depeg

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Written by

William Miller
Published on

December 9, 2022

Key points: 

  • On Dec. 8, the Digital Asset Exchange Association (DAXA), a group of five major South Korean cryptocurrency exchanges, issued a warning about Waves and its WAVES token.
  • The alert comes after USDN, the WAVES-backed stablecoin, was de-pegged and has so far failed to recover from its $1 peg in more than 180 days. 
  • This means that the USDN protocol can liquidate WAVES through an automated arbitrage process in an attempt to regain margin.
  • DAXA’s move to issue the alert resulted in Upbit delisting WAVES and USDN.
  • The delisting, coupled with the DAXA warning, appears to have played a role in the price drops WAVES and USDN is currently witnessing.

Algorithmic stablecoins have had a rough year, starting with TerraUSD (UST) pegged to zero and the subsequent explosion of Terra LUNA tokens for hedging assets. Algorithmic stablecoins are not fully collateralized and rely on various mechanisms to maintain their peg to fiat currencies, making them inherently vulnerable to market volatility.

The UST implosion created a domino effect that led to the decoupling of another stablecoin, Magic Internet Money (MIM). Despite the fragility of algorithmic stablecoins, new projects like Cardano's Djed are still planning to launch, but that doesn't mean the concept has improved since the crisis earlier this year.

Let's take a look at the latest Depeg events in the cryptocurrency space.

Warning on WAVES and its stablecoin USDN

On Dec. 8, the Digital Asset Exchange Association (DAXA), a group of five major South Korean cryptocurrency exchanges, issued a warning about Waves and its WAVES token.

The alert comes after USDN, the WAVES-backed stablecoin, was de-pegged and has so far failed to recover from its $1 peg in more than 180 days. This means that the USDN protocol can liquidate WAVES through an automated arbitrage process in an attempt to regain margin. On Dec. 8, the dollar traded 16 percent below its peg.

USDN/USD 180 D chart. Source - CoinGeckoUSDN/USD 180 D chart. Source - CoinGecko

DAXA’s move to issue the alert resulted in Upbit delisting WAVES and USDN. The delisting, coupled with the DAXA warning, appears to have played a role in the price drops WAVES and USDN is currently witnessing.

Byzantine Tweet

Algorithmic stablecoins are not the only ones decoupling. Ongoing concerns about Tether's packaging and its general solvency continue to raise concerns about Depeg among investors at all levels.

USDT lost touch over the years, but never to the extent that UST and USDN did.

As the community continues to be onslaught by algorithmic stablecoins, regulators are taking note and prioritizing the regulatory space.


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