One category within the crypto verse seems to be under intense pressure. Though most cryptos,
whether meme coins or gaming tokens, are down, it is the dip in values of
stable coins that has raised eyebrows. Stable coins are not supposed to be volatile. This
is because any asset in this category is pegged to assets like fiat currency or precious metal.
If pegged to fiat currency USD, the value of the stable coin should be US$1 at all times.
But one of the top stable coins, TerraUSD or UST token, has lost its peg, triggering a
broader negative sentiment in the crypto verse. Now, another stablecoin DEI, has lost its peg.
What is DEI stablecoin project?
DEI belongs to the DEUS Finance project, which claims to be a decentralized autonomous
organization. The project states it is a decentralized finance ecosystem, with features
like scalability within a wider permissionless protocol. The decentralized finance category
of cryptoverse claims to provide crypto loans and related financial services. DEI
is the stablecoin of the project, alongside another token DEUS. It is claimed that DEI
maintains peg with the US dollar. By this measure, DEI token must have a value of US$1.
The other token DEUS plays an important role. It is said that a purchase of DEI stablecoin
triggers the burn of DEUS token. DEI’s primary utility, according to DEUS Finance, is the token’s
cross-chain functionality. DEI is the liquidity provider to trade in other synthetic tokens.
Now let’s look at DEI crypto price performance
According to CoinMarketCap price data, DEI has recently suffered a massive loss.
This has taken away its peg with the USD. DEI had a price of nearly US$0.6 on 17th May.
In the span of one day, DEI had lost over 25 per cent. DEUS crypto, linked to DEI, was also in red.
Trading at nearly US$210, DEUS token was down almost five per cent on 17TH May although up
on a year-to-date basis. The trading volume, however, of both DEI and DEUS was in green.
After falling on 17th May, DEI saw some gains on 18th May as it rose by 6.04% at US$0.5934.
Similar was the case with DEUS as it saw gains of 8.56% to be at US$ 219.69.
So, let’s discuss Why did DEI fall?
DEI crypto is another “algorithmic” stablecoin like TerraUSD (UST). It is said that TerraUSD fall
had to do with how the stablecoin maintained reserves. DEI may be facing similar issues
with its reserves, which are important to back the value of the asset at all times.
To sum it up, DEI can be said to have entered the same phase as UST. A part
of the wider DEUS Finance project, DEI token is supported by another token DEUS.
DEI’s dollar peg loss is another jolt to the stablecoin category.
The cause may be how “algorithmic” stablecoins maintain their reserves to back the asset.