On October 11, the real estate-backed stablecoin, USDR, plummeted to $0.53 per coin as it lost its peg to the United States dollar.
Additionally, the Tangible protocol team, responsible for USDR, clarified that this peg loss was primarily caused by a liquidity issue and that they would utilize their real estate holdings and digital assets to facilitate redemptions.
USDR’s Background and Assets
The Tangible protocol, a decentralized finance (DeFi) project with the goal of tokenizing real-world assets, including housing, issues USDR, a stablecoin backed by a combination of cryptocurrencies and real estate assets.
USDR predominantly trades on the Pearl decentralized exchange (DEX), which operates on the Polygon network. According to a tweet by Tangible on October 11, a sudden surge in redemptions led to the depletion of liquid DAI from the USDR treasury, causing a rapid decline in the coin’s market capitalization.
Further, the tweet explained that the lack of DAI for redemptions prompted panic selling, ultimately leading to the depegging of USDR.
USDR Price Plunge and Recovery
Around 11:30 am UTC, USDR experienced a significant sell-off, with its price dropping to as low as $0.5040 per coin. However, it did manage to recover slightly, reaching around $0.53 shortly after the initial drop.
While the stablecoin lost nearly 50% of its value, the project’s developers expressed their commitment to resolving the issue, emphasizing that it was a temporary liquidity challenge affecting redemptions.
The Tangible protocol team addressed the situation by stating that it was a liquidity issue and assured users, and that they would use the real estate assets and digital assets supporting USDR to facilitate redemptions.
Remaining Asset Value Of USDR
However, despite the setback in the treasury, official website of the USDR app, as of 9:57 pm UTC on October 11 indicated that its assets remained worth more than the entire market capitalization of the coin.
Furthermore, it’s worth noting that 14.74% of USDR’s collateral comprises Tangible (TNGBL) tokens, which are integral to the coin’s native ecosystem. The remaining 85.26% collateralizes real-world housing and an “insurance fund.”
The Challenge of Stablecoin Pegs
Stablecoins are traditionally designed to maintain a value of $1 on the open market. However, under extreme market conditions, they can lose their peg. Moreover, a similar situation occurred with Circle’s USD Coin (USDC) on March 11, when it briefly fell to $0.885 per coin but subsequently regained its peg.
In contrast, Terra’s UST lost its peg in May and has not been able to recover, currently valued at $0.01 per coin as of October 11, according to data from CoinMarketCap.