In the past few hours, TrueUSD (TUSD), the stablecoin associated with Justin Sun, experienced a concerning depegging, falling below its fixed value of $1. This event, which took place around 11:00 am UTC on January 15, marked a significant decline, with TUSD reaching a minimum of $0.984 by 11:15 pm and currently trading at $0.988. This fluctuation represents a deviation of 1.3% from its target.
The depegging of TrueUSD coincided with a massive sell-off on the Binance exchange, where over $339.2 million worth of TUSD was sold in the last 24 hours, while buy orders amounted to only $296.8 million, resulting in a net outflow of $42.3 million. This increase in trading activity heightened concerns about the stability of TrueUSD.
Alarms sounded when reports suggested that TrueUSD might be facing challenges in undercollateralization, linked to issues in providing real-time attestations of its reserves. Errors in its Application Programming Interface (API) were highlighted, preventing the accurate delivery of U.S. dollar values for its backing assets. Analysts at Protos revealed that multiple system failures contributed to this situation, casting doubt on the adequacy of the guarantees supporting the stablecoin.
Attention intensified when a pseudonymous user, Rho Rider, pointed out an arbitrage opportunity on December 16. He noted that TUSD was trading approximately 8% below its value on Poloniex, while it remained stable at around $0.99 on Binance. The lack of exploitation of this disparity raised questions about perception and confidence.
TrueUSD is Not the Only Affected Stablecoin
Stablecoins are designed to maintain a stable value by being linked to a specific asset or currency, often the U.S. dollar. Growing regulatory pressure and concerns about transparency have also impacted other stablecoins, such as Tether (USDT). The fall of TrueUSD underscores the importance of robust audits and transparency in the stablecoin ecosystem, essential aspects to ensure user confidence in the stability of these cryptocurrencies.
In light of this situation, investors and traders in the cryptocurrency market are exercising caution and closely monitoring the evolution of TrueUSD, assessing whether this event could have broader implications for the valuation of other stablecoins.