What Happened with Magic Internet Money and USD Coin?
In a rather eye-popping turn of events, user @cryptotutor took to Twitter on a fateful Friday, showcasing a screenshot that revealed an astonishing 27% spread between Magic Internet Money (MIM) and USD Coin (USDC). For those uninitiated, both these stablecoins are designed to maintain a 1:1 peg against the US dollar. One would expect a $1 million swap of MIM to yield, well, roughly a million in USDC. But our friend @cryptotutor was offered only 728.6k in return – yikes!
A Community of Concerns
With eyebrows raised, other users chimed in, sharing their own harrowing tales of swaps gone wrong. @DeFiDownsin reportedly attempted to trade $984,000 in MIM for a paltry 4,173 USDT on another decentralized exchange, SushiSwap. Talk about a bad deal! It seems like these stable assets were having a tough time stabilizing.
Curve’s Take on the Swap Situation
Enter Curve Finance, the popular stablecoin trading platform, which stepped in to shed some light on the mess. In a tweet, they pointed out that Uniswap has significantly improved since the dismal swap example shared. Meanwhile, they cautioned that SushiSwap is generally unsuitable for stablecoin exchanges. In other words, if you’re planning to trade stablecoins, maybe think twice before hopping on SushiSwap, unless you enjoy disappointment!
The Stablecoin Exodus Explained
During bear markets, what’s a crypto investor to do? Typically, they flee the volatility of fluctuating assets and clamber into the comforting arms of stablecoins. Take for instance the meteoric rise in deposits in the Anchor Protocol from $2.3 billion to $6.1 billion, all due to it promising impressively high yields of around 20%. Who wouldn’t want a piece of that?
Liquidity Issues and Market Impact
However, this surge comes with its own set of problems. With so much capital streaming into stablecoins, liquidity on exchanges has plummeted, causing spreads to widen alarmingly. This results in significant issues, as the promise of a stable yield becomes less sustainable when there aren’t enough borrowers to offset depositors’ interest. Suddenly, that 20% yield seems like a mirage, doesn’t it?
Curve’s Resilience in the Market
On a brighter note, while others grapple with instability, Curve continues to shine. The platform reported a staggering daily trading volume of $3.6 billion, with total deposits skyrocketing past $16.7 billion. Investors eager to exploit the differences between various stablecoins’ pegging to fiat are clearly keeping Curve in business. So, even amidst the chaos, some are finding a way to profit!
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