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The usual protocol, the shiny new stablecoin, is seeing the “stablecoin” USD0++ (a common misconception) lose parity with USD0 as of 17 hours ago. It is now trading at around $0.92.
But of course, USD0++ is not a stablecoin. It is a liquid derivative of the USD0 stablecoin, somewhat similar to Lido's stETH than ETH. (A USD0 peg is fine, and underlying T-bills don't have a backing issue.)
Usual's business model is based on the idea of an “onchain Tether” that rewards users. By staking USD0 for USD0++, you receive the returns of the underlying Treasuries and their rewards in the protocol's native token, USUAL.
If USD0++ stakeholders change their mind before the vesting date, they can exit by forgoing the rewards and return to USD0 at a 1:1 exchange rate. This first checkout option will be available as of next week.
This explains why the "separation" between USD0 and USD0++ is not exactly a defect. Think of USD0++ as a bond with a maturity of four years. These bonds are technically supposed to trade at a discount to reflect the risk premium for holding them for four years. Economists call this the "time value of money."
Recall that in June 2022, Lido's StETH was also used, depegged of ETH amid financial problems around Now defunct Celsius.
Market panic led LPs to withdraw STETH liquidity from Curve pools, causing massive turnover Liquidity imbalances and stETH:ETH depeg. Just as stETH does not necessarily have to trade at parity with ETH, USD0++ does not have to trade at parity with USD0.
However, what is causing the value of USD0++ to drop today is Usual announcing an alternative exit option from USD0++ to USD0. This feature was mentioned in a blog post published yesterday.
Based on update Documentsthe new exit option will allow users to redeem USD0++ for USD0 at a manually specified minimum price of 0.87 USD0 per USD0++, while keeping the rewards in the usual emissions (unlike the original 1:1 exit option).
Why $0.87? Because it is the discounted price at fair value. Such as Treehouse Finance @mytwogweis He explains:
If you expect 4% annually over four years, the fair value of USD0++ today should be about $0.855. This means you would buy it at $0.855, hold it for four years, and then redeem it at $1 for a risk-free return of 4%.
In simpler terms, the new exit option more accurately reflects USD0++ for what it is: a long-term bond.
The problem is that Usual's go-to-market strategy was actually built on different foundations.
Suddenly, Pendle PT-USD0++ farmers who entered into fixed-return trades find that they have "overpaid" for the bond at face value (at maturity, 1 PT USD0++ equals 1 USD0++).
For example, the USD0++ Pendle pool (with a maturity date of January 30, 2025) is experiencing a dump.
To make matters worse, the curators of the lending markets in Morphou did just that Encrypted Prices in USD0++: USDC markets at a 1:1 ratio, rather than basing assets on a free floating market price.
The result: Risk trustee Gauntlet and other LPs immediately reallocated $0++ of vault supply liquidity from Morpho vaults above the current market price of $0.91 before the news, sparking public rumors of insider trading.
In an email to Blockworks, Tarun Chitra, founder and CEO of Gauntlet, said of the company's activity: “However, we were not privy to any prior notice, as the timestamp of these transactions shows (the Usual team updated its documentation on the refund prior to this) We have focused on ensuring that our users are not exposed to risk, and we automatically rebalance out of markets when risk or concentration limits are violated.
MEV Capital issued a General statement She denied receiving any inside information from Usual, although she did not say who the company received the information from.
USUAL, the protocol's native token, is down -18.7% over the past 24 hours, as of 11:45 a.m. ET.
Macauley Peterson contributed reporting.
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