The impressive fall of the UST is starting to have consequences for the entire algorithmic stablecoin sector. The first victim is the DEI.
After the UST, it is the turn of the DEI to see its value fall. The algorithmic stablecoin of the DEUS ecosystem, which was pegged to the dollar, lost its peg on the night of May 15, falling in a few hours from a value of one dollar to 0.52 dollars. The crypto has since been struggling to rally, and was back at $0.67 at the time of this article’s publication. But there is no guarantee that it will be able to recover definitively – because, as Numerama showed a few days ago, the fall of the UST could well mark the end of crypto algorithms.
Stablecoins are a separate category within cryptocurrencies. They are, by definition, supposed to have a stable price, and use different mechanisms to do so. The most popular stablecoin, Tether, uses dollars or stocks to collateralize its price — but in the case of algorithmic stablecoins, like UST and DEI, there are a number of calculations involved. But in some cases , these devices are not enough: Terra’s UST project is proof of this, and the DEI could well be the next one.
The fall of the DEI, the first of a long list?
DEI is the algorithmic stablecoin of the DeFI (decentralized finance) ecosystem of DEUS, a cross-blockchain project that offers financial services. The DEI works hand in hand with the DEUS, the other cryptocurrency of the system, and it is thanks to a mechanism of burn and mint that the two assets manage to balance each other — and the DEI, to maintain its indexation. This is a device slightly from that of UST and LUNA, although the stablecoin also relied on the relationship between the two cryptos to keep its value.
The DEI stall is partly due to several attacks that the ecosystem has suffered in recent months, which has caused the DEUS to lose 43% of its value, explains the specialized media Decrypt. With this drop, the mechanism to keep the DEI afloat was made more complex, and failed to keep up — and some users took advantage of the dual crypto balancing system to sell DEUS at the DEI price. As a result, the price of the stablecoin stalled.
The fall in the value of the DEI is not entirely due to the UST – but the timing is not insignificant. Did the sinking of the Terra stablecoin give ideas to others, who tried to make money on the back of the DEI? For now, it’s hard to say. What is certain is that it will be difficult to restore investor confidence in a project similar to the UST – and this stall does not bode well for the future of the DEI.
Can the IED be saved?
” Our team is working tirelessly to restore the indexing of the DEI “warned DEUS on Twitter on May 16, hours after the dropout. ” Mitigation measures were put in place immediately and solutions to ensure long-term stability are being developed.”
For the moment, the teams of the DEUS ecosystem are avoiding making the same mistakes as that of Terra: they have suspended the balancing mechanism between the two cryptos for the moment, and are trying to set up a new collateralization system. for the DEI. It remains to be seen whether this will be enough to allow it to regain its indexing.
For the moment, the teams of the DEUS ecosystem are avoiding making the same mistakes as that of Terra: they have suspended the balancing mechanism between the two cryptos for the moment, and are trying to set up a new collateralization system. for the DEI. It remains to be seen whether this will be enough to allow it to regain its indexing.
For now, overall, the “classic” stablecoin sector seems to be holding up. During the UST crash, all heads turned to Tether, the most popular stablecoin, which briefly stalled at $0.95. In the end, he held on and was able to return to his indexing – but the whole sector remains extremely feverish. If the DEI can’t get up soon, it may be too late for him.