Last week’s collapse of cryptocurrency UST spelled trouble for the entire category of stablecoins. Now another one, DEI, has lost its peg to the U.S. dollar.
The stablecoin, created by crypto derivatives trading platform Deus Finance, first lost its peg on Sunday and hasn’t been able to regain it since. On Wednesday the cryptocurrency was trading at about 60 cents, according to CoinMarketCap, well below its theoretical $1 peg.
DEI is in a category of cryptocurrencies called stablecoins that are usually tied to a non-crypto asset like fiat currencies such as the U.S. dollar. The most popular stablecoins, Tether (USDT) and USD Coin (USDC), are used by investors to convert their dollars into crypto, buy other types of cryptocurrency, or to serve as a safe haven asset that crypto investors can use to avoid fluctuations in other tokens.
DEI is backed by cryptocurrencies. Twenty percent of its reserves are in Deus Finance’s native cryptocurrency while the remaining 80% is a combination of other stablecoins.
To regain DEI’s peg to the U.S. dollar, the Deus Finance team is selling their own quasi-treasury bonds that they hope will incentivize people to add to the stablecoin’s liquidity. In a blog post, a member of the Deus Finance DAO said the stablecoin didn’t have enough USDC to back it because of a hacking in March in which $3 million of crypto was stolen.
DEI is the latest stablecoin to lose its peg after what analysts have called a “death spiral” selloff pushed the price of Terraform Labs’ UST stablecoin down to 13 cents last week from its dollar peg. Meanwhile, Luna, the cryptocurrency that helped UST regulate its price, lost nearly 100% of its value in less than a day, leaving investors with huge losses.
