TrueUSD Depegging Linked to Binance Launchpool Activities

On January 18, 2024, TrueUSD (TUSD) blames Binance Launchpool mining activities for the depegging on X. It says,

Regular attestations are ongoing as part of our standard operations, and any claims suggesting otherwise are incorrect. We have observed recent community mining activities associated with Binance Launchpool, which have led to short-term arbitrage opportunities.

The recent depegging of TrueUSD (TUSD) has garnered significant attention in the cryptocurrency community. This event was closely associated with the activities on Binance Launchpool and resulted in TUSD’s value dropping below its $1 peg, reaching as low as $0.97.

On January 15, 2024, a substantial sell-off of TUSD was observed on the cryptocurrency exchange Binance, leading to a notable depegging from the US dollar. Over a 24-hour period, traders sold more than $339.2 million worth of TUSD, compared to $296.8 million in buy orders, resulting in a net outflow of $42.3 million from the exchange​​.

The situation was exacerbated when TrueUSD experienced issues with real-time attestations of its reserves around January 10, raising concerns about the stablecoin possibly being undercollateralized. These technical difficulties, identified in the API, prevented the provision of accurate U.S. dollar values to its collateral assets. Additionally, on Poloniex, a cryptocurrency exchange, TUSD had been trading at about 8% below its peg for several weeks, while maintaining a relatively steady price around $0.99 on Binance​​.

Addressing the depegging, the TrueUSD team linked the incident to activities associated with Binance Launchpool. They observed recent community mining activities that led to short-term arbitrage opportunities. Despite concerns, TrueUSD reassured users about the normality of such market dynamics and liquidity adjustments. They emphasized the smooth operation of their redemption channels and the ongoing functionality of TUSD minting and redemption services​​​​.

This incident of depegging raises broader questions about the stability and transparency of stablecoins in the crypto market. In June 2023, TrueUSD had temporarily halted its automated attestations due to balance discrepancies. The stablecoin issuer later announced an upgrade in their fiat reserve audit and attestation system in partnership with accounting firm MooreHK. TrueUSD stated that their total assets held in reserve accounts amounted to $1.93 billion​​.

The recent decline in TUSD’s value coincided with the introduction of a rival stablecoin, FDUSD, into Binance’s staking program. Market analysts speculate that a significant number of investors sold TUSD for FDUSD to participate in Binance’s rewards programs, potentially contributing to TUSD’s de-pegging​​.

TrueUSD’s depegging highlights the fragility of stablecoins in volatile market conditions and the need for robust mechanisms to maintain pegs to underlying assets. It also underscores the importance of transparency and trust in the management of stablecoin reserves, which are crucial for maintaining investor confidence and the overall stability of the crypto market.

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