New Terra Case? Billion Dollar Stablecoin “De-Peg” Explained!

MakerDAO’s co-founder Rune Christensen, DAI owned by stablecoin USD Coin (USDC) He stated that by resetting all his positions, he could exit the USD peg.

According to Daistats, the DAI stablecoin is currently 60% backed by USDC.

MakerDAO May Dispose of USDC Tokens Supporting DAI Following Tornado Cash Sanctions

Christensen made the remarks on the MakerDAO Discord channel on Thursday. The MakerDAO co-founder said the US Treasury’s recent sanctions against crypto mixing service Tornado Cash are the reason they are considering this exchange.

According to Christensen, the sanctions are more serious than they initially thought. The Centre, the consortium behind USDC, froze USDC funds in Tornado Cash wallets following the sanctions.

Christensen said in his statement:

“We will discuss this at tonight’s call, but I think we should seriously consider preparing to leave the USD… It is almost inevitable that it will happen, and it would be realistic to do it only with a great deal of preparation.”

The DAI stablecoin could lose its US dollar peg leaving the USDC position. This is because the current stabilization of DAI is maintained through something called the “price stabilization module” or PSM.

PSM, USDC and Ethereum (ETH) It allows printing of DAI at a fixed rate in exchange for acceptable collateral such as This flat rate requires a little more collateral than $1 to print $1 worth of DAI.

Stablecoin DAI May Lose Its $1 Pin If MakerDAO Sells USDC Assets and Buys Ethereum

According to data from Makerburn, DAI is backed by more than 80% of stablecoins, of which USDC makes up the majority. Therefore, if MakerDAO sells its USDC for something like ETH, DAI could lose its $1 peg due to PSM corruption.

Christensen said this is an acceptable risk and the MakerDAO community will discuss the matter in a management meeting today.

Christensen’s comments are many important cryptocurrency criticized by the expert. Ethereum co-founder Vitalik Buterin called it a “risky and terrible idea” and added that a significant drop in ETH’s spot price could render collateral support for DAI less than likely necessary.

Errr this seems like a risky and terrible idea. If ETH drops a lot, value of collateral would go way down but CDPs would not get liquidated, so the whole system would risk becoming a fractional reserve.

— vitalik.eth (@VitalikButerin) August 11, 2022

Robert Leshner, founder of DeFi protocol Compound Finance, argued that this move could affect the stability of DAI. According to Leshner, this could have implications for the DeFi field as a whole. “Converting DAI to a price-resilient asset would ruin it, period,” Leshner added.

*Not investment advice.