The Polygon-based USDR stablecoin, which is typically pegged to the US dollar, lost nearly 50% of its value, falling to $0.52. This significant loss of value has raised concerns and prompted the USDR team to announce a comprehensive action plan to address the situation.
Reasons Behind the Depegging
An update on $USDR
Over a short period of time, all of the liquid $DAI from the $USDR treasury was redeemed.
This lead to an accelerated drawdown in the market cap.
Combined with the lack of DAI for redemptions, panic selling ensued, causing a depeg.
We’re working on…
— Tangible 🏠💙 (@tangibleDAO) October 11, 2023
The instability in the value of the USDR stablecoin was triggered by a rush of redemptions, primarily involving the removal of DAI from the coin’s collateralization basket. USDR, backed by a combination of cryptocurrencies and real estate assets, is issued by the Tangible Protocol, a decentralized finance project aiming to tokenize real-world assets like housing.
As the rush of redemptions drained liquid assets such as DAI from the USDR Treasury, it led to a sharp drawdown in the market cap. This, combined with the lack of DAI available for redemptions, triggered panic selling, causing the depegging of USDR.
Recovery Plan for the USDR Stablecoin
Despite this sudden loss in value, the project’s developers, TangibleDAO, took to X (formerly Twitter) to assure users that it was primarily a liquidity problem. They emphasized that the real estate and digital assets supporting USDR still exist and will be used to support redemptions.
As we’ve all seen, USDR has suffered a serious depeg.
Over a short period of time, all of the liquid DAI from the treasury was redeemed.
This led to an accelerated drawdown in the market cap.
Combined with the lack of DAI for redemptions, and liquidation timeline on real… pic.twitter.com/1sgRPfpIT0
— Tangible 🏠💙 (@tangibleDAO) October 11, 2023
Furthermore, the project team revealed a four-step plan to stabilize and recover USDR. The team disclosed that the USDR Stablecoin is currently 84% collateralized when marking TNGBL and the insurance fund as zero. They have already pulled POL from Pearl, burned USDR, and intend to liquidate as many insurance fund assets as possible. The remaining stablecoins from these sales will be made available for user redemption.
Furthermore, TangibleDAO maintains that Baskets, pools of tokenized real estate, are almost ready for launch. They will play a crucial role in the second phase of the redemption process. When users receive Basket tokens, they will have the option to hold the real estate-backed tokens and earn yields or trade them on Pearl.
Once Baskets are deployed, the team will open redemptions, allowing USDR to be fully redeemed for a blend of stablecoins, Basket tokens, and locked TNGBL 3,3+ NFTs.
“Baskets are 100% backed by tokenized real estate. There’s no peg, asset value is transparent. Any user can redeem basket tokens for the underlying Real Estate TNFT, burn the TNFT and take control of the SPV and Real Estate within that SPV,” the team stated.
The project team finally acknowledged that Tangible’s future will no longer include the USDR stablecoin, as they found vulnerabilities in its design. They promised to share a full post-mortem once the redemption process is complete and expressed their commitment to continue building and improving products in the decentralized finance space.
