Synthetic dollar stablecoin USDX depegs, dropping to the $0.50 range

On the 6th, the price of the synthetic dollar stablecoin, USDX, fell sharply. At the time of writing, it was trading at $0.59 (approximately ¥90), and the progress toward de-pegging remains unclear.

Unlike fiat stablecoins, which are issued with US dollars as collateral, USDX is an algorithmic stablecoin. Specifically, it uses physical cryptocurrencies such as Bitcoin (BTC) as collateral and simultaneously combines options positions to stabilize its price and achieve a price linked to the US dollar.

USDX, which had a maximum value of $680 million and was primarily traded in the DeFi (decentralized finance) space, appears to have been heavily affected by the unauthorized data leak at Balancer, a major DEX (decentralized exchange), that occurred on the 3rd, as well as suspicious activity in a wallet linked to founder Flex Yang.

Additionally, the huge operating losses suffered by fellow DeFi platform Stream Finance caused a significant de-peg on its xUSD, spreading distrust in DeFi and further impacting USDX's price.

DeFi-related platforms such as Lista DAO and PancakeSwap have issued statements to the effect that they are "closely monitoring the situation" and are calling on Stable Labs, the issuer of USDX, to make improvements. However, Stable Labs has not yet announced any countermeasures regarding the depegging.

While stablecoin depegging has occurred in the past, the Terra Luna incident is particularly similar to this one.

This incident caused chaos in the cryptocurrency market when the prices of the cryptocurrency Luna (LUNA), issued on Terra, and the algorithmic stablecoin TerraUSD (UST), issued as part of a related project, plummeted due to the breakdown of their price maintenance mechanisms. This incident sparked accelerated efforts to establish stablecoin regulations around the world.

Regarding the recent depegging of USDX and other cryptocurrencies, if the situation does not improve, it is possible that the relevant DeFi services will take some kind of action, and it could have a negative impact on the cryptocurrency market as a whole. It is also possible that this could have an impact on other stablecoins, so future developments will require close monitoring.

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