Alternate headline…
The $USDN peg has come under severe strain lately. It first dropped to $0.94 on the dollar.
Then sank lower…
And lower…
How low can you go?
Time to short all stables?
OK, maybe it’s not quite as dire as all that. In the subsequent day the peg has shown signs of recovery.
Even if the peg does successfully recover, it still represents the most severe depeg since USDN’s inception.
For some background, $USDN is the interest-bearing stablecoin issued by the WAVES network. The $WAVES token has also seen its fortunes rise and fall just as rapidly over the two weeks.
For as long as we’ve followed Curve, we’ve also seen warnings about $USDN and the broader WAVES network. We’re not high IQ enough to know whether or not the FUD is credible. For our sake, we’ve always been too busy trying to understand the explosion of projects on Ethereum to spend any time diving into WAVES.
As for this latest downturn in WAVES, allegations are floating around that it’s Alameda driving the downturn, which the team denies.
To fully wipe out $USDN, the $WAVES token would have to drop a lot further.
If it is in fact Alameda behind the dump, they may have to pump the breaks before they soak their own position.
For this reason plus more, fans are confident the peg will return. $USDN is supposedly overcollateralized. If true, then this depeg would simply be an arbitrage opportunity for when the peg in fact returns.
For those who believe the collapse narrative, !remindyourself to check back in early June.
A complete apocalypse would be bearish for anybody in these pools, but bullish for comedians and moralizers.
Over the past day, the peg has in fact started to restore. At time of publication, it sat above 90%.
Some interesting takeaways here. First is to observe recent Curve governance moves.
The A value on the $USDN pool has been pushed upwards over the past month, which permits the pool to stay pegged under harsher conditions. For reference, the unflappable 3pool is at an A parameter of 5000.
Even if you’re a complete bystander to $USDN, if you have exposure to other risky pools you may want to take notes on how this shakes out. During rough market conditions, we’ve also seen the Terra $UST peg impacted to a lesser degree.
If you own $cvxCRV, these mechanics can also affect you even if you have zero exposure to the pool. The Curve Factory Pool serves as the primary bridge between these tokens, so your capability of bridging between $cvxCRV back to $CRV depends on the health of this pool. If you need to bridge back to $CRV during severe market conditions you may be forced to do so at a loss. $cvxCRV has traditionally sat between 94% to 99% of the value of pure $CRV.
Lately the peg is getting healthier, thanks to services like the Union and Concentrator.
For traders, the way to game any depeg threats is pretty much always the same.
If you expect the peg to restore, then you want to buy up as much of the distressed asset as you can. If the peg does restore, the bonus accrues to your benefit.
If you expect the peg to collapse, then run away as quick as you possibly can!
🪂🪂🪂 Airdrop Season 🪂🪂🪂
The LendFlare airdrop is live!
If you have positions around the flywheel ecosystem, you’ll want to keep an eye on the LendFlare no-liquidation lending protocol. Their airdrop went live yesterday, albeit with a bit of turbulence.
Rather than use the simplistic method to calculate veCRV holders we outlined in our prior article on the subject, the team mistakenly used an incomplete dataset ripped from Etherscan to represent veCRV holders. This credited under a hundred addresses, though over 10K should have been eligible.
Fortunately Curve Founder Michael Egorov airdropped himself into the LendFlare Telegram to save the day. LendFlare is dipping into their own pockets to correct the situation, with a patch rolling out shortly.
LendFlare raised $4MM in their IDO. In rather interesting mechanics, presumably to fend off dumping, the airdrop is being released over a four year window.
If you missed the LendFlare IDO, you still have other opportunities around the flywheel ecosystem. Conic Finance has a community raise today at 6 PM UTC.
Disclaimers! Author has a shrimp-sized stake in the USDN pool, plus an unclaimed eligibility for the LendFlare airdrop.