TrueUSD Depeg Incident - Things that Go Wrong in Stablecoins

Stablecoins are usually backed by the treasury and also they happen to follow the fiat currency in real time. Which kind of keeps it on the peg. There are some programmatic pegs and some are treasury backed pegs. Which kind of goes to show how they keep up in centralized and decentralized stablecoin market.

Most of the stablecoins which are into centralized exchanges like USDC, BUSD, USDC and few others. They are actually keeping the reserve with the govt and they are keeping the peg adjusted and they don't go below or above much. But if there is a manipulation then you can expect the cases like Luna Stablecoin.

It's a past now but it was one of those incidents which makes the USDC and USDT as two good options as they happen to work with govt to retain the peg as well. So here TrueUSD a stablecoin that has lost it's peg recently, let's talk about how it is going to work out for all.

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What happened to TrueUSD? What is depeg?

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Every stablecoin is stable because it pegs to the price of the fiat native currency. So say USDT is a stablecoin pegged to the USD. And like this it is called a peg. As long as it retains same value as the base native fiat coin. The moment it goes out of the value and continues to go down the value it is called the depeg. In some of the case the value may also appear higher than the fiat price but that's not depeg in consideration.

In case of the TrueUSD, the value went down. And that means the value which was supposed to keep it stablecoin didn't turned out to be one here. Which kind of is the case for most of the depegged stablecoins, be it LUNA or the TrueUSD. In case of LUNA it was hit and run case from the founders and they paid the price for the heist depeg of their stablecoin.

What made the depeg of TrueUSD?

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There are always a set of reasons on why events happened the way they do. And this means we are going to be seeing the depeg event of the TrueUSD also following some path for the stablecoin going out of the rail too. This is what has been happening over the years with many stablecoin and we will see what is the case with trueUSD. So first case is the transparency.

Your coin should have the peg transparency. If it is treasury backed and if it is how it maintains technically the peg of such treasury backing? That is not clear. Also another incident is does launch of other coins or the pools have any impact on your stablecoin? If yes then it is not the stablecoin in a true sense. They are just surviving the fiat peg. Competitor jacking, which happened in case of LUNA and also with the trueUSD, where other exchanges can deny or delay some of the transactions which can hurt the stablecoin if it's removed for certan big orders.

What to expect now from the TrueUSD like stablecoins?

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Now that things are going more centralized and also pegs are maintained through govt control. We are going to be seeing more damage to the decentralized coins. This includes the stablecoins. Don't be surprised the stablecoins of the community owned coins lose the peg or lose the listing completely. So the trueUSD too is going to be all that and govt is going to make such companies struggle more.

If the people in the trueUSD team are going to be playing with the govt through regulations and transparently back up the stablecoin and retain the peg. Things would get back on track. If that does not work, expect the downward spiral even more further and if you see the signs, exit and make the cut off withdrawal before damage happens.

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TrueUSD had a lot of damage in few hours and the peg has collapased to 0.97 and it's harder to maintain activity for them. If treasury and govt backing works out along with the maintaining peg process, I feel trueUSD has a chance otherwise expect legal actions, drama and market shaking.

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