In the realm of cryptocurrency, everyone from retailers to giant investors knows the value of stablecoins (U.S. dollar-pegged). Recently, on January 18, 2024, the world’s fifth-largest stablecoin TrueUSD (TUSD) experienced a fall in its value. As a stablecoin, this fall raises concerns as the token varied from its usual peg to the US dollar.
TUSD loses its stability
According to a recent report by Bloomberg, the TrueUSD (TUSD) value plummeted to 97 US cents on Thursday in Asia. However, TrueUSD is relatively considered less attractive by investors and retailers as they mostly prefer the world’s third-biggest cryptocurrency and the first-biggest stablecoin, Tether (USDT), and another stablecoin, USDC.
Besides, its price deviates from its usual peg with the US dollar; currently, TrueUSD (TUSD) market capitalization also plummeted to $1.9 billion. Yesterday, on January 16, 2024, in Singapore, it was found that TUSD was trading around 98.6 US cents and also made a low of 97 cents, indicating that TUSD has departed from its intended US dollar peg.
With this price variation as a stablecoin, its market capitalization also got affected as it dropped by 0.5%, and currently stands at $1.88 billion. Here, the 24-hour volume significantly surged by 55% as investors and retailers took advantage of its unpegged status. Currently, TUSD is trading near $0.9864, and still, it has variation in its price.
TrueUSD gained visibility when Binance, the world’s largest cryptocurrency exchange, incorporated it into its trading promotions. However, the platform later shifted its focus to another stablecoin, causing TrueUSD’s market value to plummet to $1.9 billion from a peak of $3.7 billion in October of the previous year, according to DefiLlama data.
The British Virgin-based TrueUSD (TUSD) is operated by Techteryx with its main offices in Singapore and Hong Kong. However, last year, the representative of this firm disclosed these details but didn’t provide information about the company executives or the owners.
Why do stablecoins fail to maintain a US peg?
Stablecoins are designed to maintain a stable value by pegging to fiat currency and in this case, the fiat currency is the US dollar. But here, TUSD has experienced challenges and a loss of its US dollar peg. This is not the first time a stablecoin experienced an unpegged situation, a similar thing was also experienced when TerraUSD collapsed last year in 2022.
However, the main reason for TUSD’s fall is the lower liquidity on the exchange, which means the order book size for both bid and ask has been lowered, creating the price fall. Another reason that may create this situation is lower adoption, as investors mostly prefer USDT and USDC.
