Congratulations to all the whales who successfully rugged retail investors! The launch of $FEI this past weekend turned out to be a sophisticated fleecing of poor people that would make the US Congress blush.
$FEI protocol is now the hottest new stablecoin in town, leaping out to a $2.6B market cap during a big money Genesis event. The coin currently sits at 5th on Coingecko’s stablecoin ranks:
You might wonder, though, why a dollarcoin is trading below $0.96? Buckle up, and get ready to learn how the world actually works.
$FEI is the latest in algorithmically backed stablecoins. There’s nothing necessarily wrong with an algorithmic stablecoin. $FRAX, for example, has essentially held its peg throughout 2021.
The $FEI algorithm was extraordinarily successful in a sense, seeing as it appears to have been deliberately designed to transfer money from poor people to rich people. @jonwu_ has the best thread on the subject, and summarizes it thusly:
More technically, from the $FEI whitepaper:
The FEI algorithm is practically an experiment in running the exact opposite mechanics of Curve. Where Curve tries to minimize slippage, FEI promotes extreme slippage as a mechanism for restoring the peg. Here’s one artist’s rendition of how FEI stacks up against other invariants:
For additional deconstruction of the algorithm, read this full thread by FRAX founder Sam Kazemian, certainly an expert on algo stablecoins if ever there was one:
FWIW, Sam argues that the instability will ultimately bleed into the accompanying $TRIBE governance token, leaving $FEI a more stable and useful alternative. So far, most people hoping to use $TRIBE as an exit strategy haven’t been so lucky. Observe this story in two parts…
A few days later:
Smart people who did their own research noticed the risk and steered clear of the herd.
So far, $TRIBE has functioned more as a lifeboat for a lucky elite.
Users are now getting a taste of what life looks like in a high-slippage world, and struggling to find a meaningful use case.
Now that the rug pull is now ancient history, what’s next for FEI? With so much money locked up, the protocol isn’t going to disappear anytime soon. We’re certainly closer to the beginning than the end. From @djma.eth’s speculative breakdown:
Indeed, salty investors have billions of dollars at stake and are looking to recoup their money. They’ll play any games the team builds out with this war chest, so we can expect a lot more action over time. The peg may correct on a long enough time horizon.
At least it’s still a bull market for Orville Redenbacher stonks.
Between $FEI and ForceDAO, this past weekend has proven there’s never a dull day in crypto.
For more info, check our live market data at https://curvemarketcap.com/ or our subscribe to our daily newsletter at https://curve.substack.com/. Nothing in our newsletter can be construed as financial advice. Author is a Curve maximalist, owns no $FEI.