Whale Selling Challenge USD0 Stable Anchor
Usual Protocol announced that at 7:00 AM UTC on January 1st, it encountered an unexpected stress test. A whale’s large-scale transaction on the secondary market triggered a significant sell-off of USD0, causing concerns about the stability of its $1 anchor. The price of USD0 briefly dropped to $0.99 but quickly recovered within seconds, even with slight basis point deviations during the continued selling period. A few hours later, USD0 fully returned to its anchored price of $1.
USD0: A Long-Term Stable Market Anchor
Usual Protocol stated that compared to similar stablecoins like FDUSD, PYUSD, and USDe, USD0 is more reliable, as the latter often trades at a slightly lower price than $1. Today’s event, although a rare stress test, once again confirmed the resilience of USD0’s design.
1:1 Collateral Exchange Mechanism Ensures Stability
Usual Protocol reiterated that the core of USD0’s stability lies in its ability to be exchanged at a 1:1 ratio for underlying collateral. The process is driven by smart contracts and is currently only open to whitelisted users. However, the Usual team is actively working towards achieving permissionless collateral exchange and undergoing rigorous audits to ensure the completion of this transition without compromising security and solvency.
Diversification Enhances Secondary Market Liquidity
Usual Protocol stated that the robustness of USD0’s secondary market liquidity is thanks to its collaboration with tokenized real-world asset (RWA) issuers. Usual Protocol has carefully selected highly liquid collateral, such as USYC, and further diversified its asset choices, including M by M^0, USDTB from Ethena, BlackRock BUIDL launched by Securitize, and OUSG issued by Ondo. This diversification strategy ensures that USD0 can be redeemed within the same day (T+0) and relies on highly liquid short-term currency market instruments for support.
First Major Stress Test Demonstrates Resilience
Despite the pressure from the whale transaction, USD0’s anchor quickly recovered and was accompanied by ample real-time liquidity for arbitrage opportunities. It is worth noting that the redemption volume from this stress test exceeded the total locked value (TVL) of other stablecoins, such as GHO, within a few hours, yet the system continued to operate efficiently.
Risk Disclaimer
Cryptocurrency investment carries a high level of risk, and prices may fluctuate dramatically, resulting in the potential loss of your entire principal. Please carefully assess the risks.