Usual Protocol Faces Instability Amid USD0++ “Depeg”
The Usual protocol, a rising player in DeFi, is under scrutiny as its USD0++ liquid staking derivative trades at $0.92, deviating from the USD0 stablecoin it represents. While USD0 remains fully backed and stable, USD0++’s divergence highlights market dynamics and strategic challenges.
Understanding USD0++ and Its “Depeg”
USD0++ functions like a bond tied to USD0, rewarding holders with T-bill yields and USUAL tokens. The perceived “depeg” stems from its discounted valuation, reflecting the time value of money, akin to Lido’s stETH and ETH dynamics.
This discount was exacerbated by Usual’s introduction of a new exit option, allowing users to redeem USD0++ for USD0 at a floor price of $0.87, alongside retaining USUAL rewards. This shift repositions USD0++ as a long-term bond but disrupts the expectations of early adopters.
Market Reactions
- Pendle Pool Dumps:
- Fixed-yield traders on Pendle have reacted negatively, viewing the new exit terms as unfavorable.
- The Pendle USD0++ pool with a January 30, 2025, maturity has seen significant sell-offs.
- Morpho Lending Market Concerns:
- USD0++ valuations in Morpho lending markets were hardcoded at 1:1 parity with USDC, contrary to its free-floating market value.
- This mispricing led to liquidity reallocations by vault curators like Gauntlet, triggering allegations of insider trading.
Allegations of Insider Trading
Rumors surfaced regarding Gauntlet and MEV Capital reallocating liquidity before the announcement. Both entities denied receiving advance notice from Usual. Gauntlet stated that their actions followed risk management protocols triggered by market shifts.
Impacts on USUAL Token
The protocol’s native token, USUAL, has dropped by 18.7% in the past 24 hours, reflecting investor uncertainty.
Looking Ahead
The instability highlights the challenges of introducing innovative financial instruments in DeFi. Usual must rebuild trust and refine its go-to-market strategies to ensure long-term adoption. Its ability to adapt will determine whether USD0++ can establish itself as a viable financial tool or remain a cautionary tale in DeFi’s evolution.