- The lack of liquidity was attributed in part to traders fleeing stablecoin pools.
- DEI’s price was $0.67 yesterday, down 31.9 percent in the last 24 hours.
Stablecoins seem to be having a terrible time. Next in line to join the bandwagon is Fantom-based Deus Finance’s DEI, which recently fell from glory.
Our team is working around the clock to restore the DEI peg. Mitigation measures were implemented immediately and solutions are being developed for long-term stability.
— DEUS Finance DAO (@DeusDao) May 16, 2022
DEI peg mechanism: https://t.co/KKt3Tsam6F
Bond program: https://t.co/UBhE3XAY7K
Further updates to follow.
Sunday saw the loss of the dollar peg of DEI, a hybrid algorithmic stablecoin developed by the DeFi protocol DEUS Finance. DEI’s price was $0.67 yesterday, down 31.9 percent in the last 24 hours. The coin’s value has fallen by 34.5 percent in the previous seven days. An estimated $62 million is the market value of the Deus project, a Fantom-based DeFi initiative. It is composed of 10% DEUS tokens and 90% other stablecoins. Terra’s UST is a collateralized stablecoin, whereas DEUS Finance’s is not (unlike UST).
Similar Fate to Terra’s UST?
Deus Finance employs two tokens: DEUS and DEI. There are two types of stablecoins: one is a native governance token for the project, and the other is an American dollar-pegged stablecoin. Similar to Terra’s UST, a mint-and-burn method is used to maintain the dollar’s value in DEI.
DEUS collateral is burned during DEI minting, removing the tokens from circulation unless another kind of collateral is applied. When DEI is exchanged for DEUS tokens, the underlying collateral is also exchanged.
Traders moved from DEI to USDC because of a scarcity of liquidity on decentralized exchanges, which caused the price to fall 20 cents on Sunday night. DEI had been trading 3 cents below its peg on Sunday. Further dropping the price of DEI was caused by further traders exchanging DEI for other tokens, supposedly to protect themselves from risk.
A DEI redemption mechanism, which allows investors to swap their DEI for other tokens, was previously stopped by Deus’ creators, which may have contributed to the dip. According to Deus developers, the lack of liquidity was attributed in part to traders fleeing stablecoin pools after UST’s collapse last week and weaker-than-usual backing for DEI tokens following a $13.4 million Deus protocol breach in late April.
