Connect with us

Hi, what are you looking for?

Stablecoin

Stablecoin USDX has lost its parity with the US dollar.

Quick Take

  • USDX dipped to almost $0.55 on Wednesday and is currently changing hands at $0.65.
  • Kava Labs said it offered UST as one of the collateral assets to mint USDX. 

Kava Network’s native decentralized stablecoin USDX has lost its parity with the US dollar. This stablecoin has a market cap of more than $80 million, according to CoinGecko.

USDX dipped to almost 0.55 on Wednesday, and is currently changing hands at $0.65 — well below its supposed dollar peg.

What may have caused USDX to lose its dollar parity is not clear. Unlike algorithmic stablecoins such as those provided by Terra, Kava Network’s USDX can be minted as a loan backed by collateral reserves. 

A likely explanation coming via Twitter from Kava Labs, the development team behind the stablecoin, is that USDX lost the peg because of its exposure to terraUSD (UST) — an algorithmic stablecoin that recently collapsed. UST accounted for some of the collateral backing USDX, along other assets including kava, cosmos, wrapped bitcoin and ether.

As UST plummeted to $0.10, losing more than 90% of its value in a week, it caused collateral liquidations that dragged USDX along. The liquidations probably contributed to USDX dislocating from the one-dollar peg, according to Scott Stuart, co-founder and CEO of Kava Labs, the development team working on the stablecoin.

Stuart claims USDX will return to the peg because it is not an algorithmic token like UST.

“USDX is not UST. Once UST is out of the system, USDX is anticipated to go back to its peg,” Stuart added

“UST has (obviously) significantly de-pegged and has promulgated some risk to downstream protocols that use it,” Stuart said, adding that the UST risk in Kava was isolated and could be tolerated.

Featured

Bitcoin

US-based Wells Fargo publicly announced its spot Bitcoin ETF investments in a statement to the US Securities and Exchange Commission (SEC). On the other...

Bitcoin Mining

The mining industry for Bitcoins incurred a sizeable debt load during the bull market of 2021, which hurt their financial health during the subsequent...

Altcoin

Ripple is attempting an upside break above the $0.365 resistance zone against the US Dollar. XRP price could fail to gain pace if it...

Bitcoin

Bitcoin price is facing resistance near $17,000. BTC could start another decline unless there is a strong move above the $17,000 resistance zone. Bitcoin...