Fantom Stablecoin DEI Becomes Latest to Lose Dollar Peg

DEI lost as much as 46 cents in European hours this morning. It follows a trend of several algorithmic stablecoins losing their pegs.

AccessTimeIconMay 16, 2022 at 12:18 p.m. UTC
Updated May 11, 2023 at 6:58 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

Deus Finance's stablecoin dei (DEI) lost its peg with U.S. dollar and fell to as low as 54 cents in European hours on Monday, data shows. The drop came amid several algorithmic stablecoins losing their peg last week.

Algorithmic stablecoins are supposed to be automatically pegged to the price of another currency. These are unlike centralized alternatives like tether (USDT) or USD coin (USDC), which are backed by actual dollars or equivalent assets stored in a bank.

DEI, valued at over $62 million by market capitalization, operates within Deus, a Fantom-based decentralized finance (DeFi) project. It comprises 10% DEUS tokens and 90% in other stablecoins.

The collateral ratio of DEI is constantly monitored and adjusted via arbitrage bots, which continually trade $1 worth of the underlying tokens for 1 DEI, or vice versa, to ensure a peg.

DEI lost as much as 46 cents on Monday. (CoinGecko)
DEI lost as much as 46 cents on Monday. (CoinGecko)

DEI – which traded 3 cents below its peg on Sunday – lost 20 cents on Sunday night as traders likely exchanged DEI tokens for USDC amid a small amount of liquidity on decentralized exchanges, which caused price fluctuations. Lower prices led to more traders selling DEI for other tokens, presumably to protect against risks, which further contributed to a price drop.

Separately, Deus developers had earlier paused a redemption mechanism for DEI – which allows investors to redeem DEI for other tokens – that may have contributed to the decline.

As such, developers on Deus’ Telegram channel explained the lower liquidity was partly due to traders exiting stablecoin pools after UST’s collapse last week and a lower-than-usual backing for DEI tokens after a $13.4 million exploit on the Deus protocol in late April.

Meanwhile, DEI has regained the 72 cents level at writing time, with Deus developers stating a repegging plan using debt tokens was in place that would prevent a collapse of the peg in the future.

The slump follows Terra ecosystem project UST costing its investors billions of dollars as it lost its peg and fell to as low as 22 cents. Associated token luna (LUNA) dropped to pennies from trading over $100 earlier this month, losing as much as 99.7% of its value in under a week.

Panic around UST last week led to a similar sell-off in other stablecoins, such as Waves’ stablecoin USDN which lost 15%.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Shaurya Malwa

Shaurya is the Deputy Managing Editor for the Data & Tokens team, focusing on decentralized finance, markets, on-chain data, and governance across all major and minor blockchains.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.