USD0++ depeg turmoil: withdrawal of restructuring causes panic, challenges the usual economic mechanism market buy or not

Recently, Stable Coin USD0++ experienced a depeg event, causing panic in the market. However, this upheaval was not without warning signs; it is actually an inevitable challenge as the project transitions from the promotion phase to the stable phase. This article will combine official announcements and market reactions to analyze the reasons behind the depeg and the possible future directions.

(After the official launch of coin安, it has been on the rise all the way, interpreting the on-chain Tether - USUAL protocol's representative coin economy and its underlying logic)

USD0++ depeg cause: 2/1 withdrawal fee, triggering market turmoil

According to the recent official announcement, starting from February 1, 2025, a withdrawal fee will be charged for the liquidity collateralized coin USD0++, and a minimum exchange rate of 0.87 will be set to stabilize the market. However, this announcement has unexpectedly caused market panic. Many high-leverage users have sold off USD0++ to avoid liquidation, causing the price to temporarily drop to 0.91.

Twitter KOL @BroLeonAus believes that the original intention of the mentioned 'minimum exchange rate of 0.87' in the announcement is to give market confidence because it is above the liquidation line (0.86) of the loan platform Morpho. However, some market participants interpret this as the possibility of the official letting the price fall to that range, further exacerbating panic. This phenomenon shows the market's high sensitivity to the risk of Stable Coin depeg, especially in the shadow of the LUNA incident.

Note: In fact, as shown in the official Usual document, the minimum exchange rate reflects the expected income before the expiration of USD0++, calculated using the Federal Reserve interest rate and defined by humans.

The settlement line of Morpho amplifies the usual panic effect and is suspected of changing the announcement.

Twitter KOL @DefiIgnas and other community members have stated that the minimum exchange rate of 0.87 was changed later, not the initial 1:1 exchange rate.

Twitter KOL @BroLeonAus believes that some investors are leaving the market due to media reports and community reminders, fearing potential liquidation risks. The large-scale sell-off further depressed the exchange price, creating a panic cycle. He pointed out that this panic did not stem from significant issues in the project's fundamentals, but rather an excessive market reaction to uncertainty during the transitional period. In addition, the deleveraging behavior of high-leverage traders is one of the core driving forces behind this depeg. As the exit fee policy becomes clearer, market sentiment is expected to gradually recover.

Usual explanation of the depeg mechanism from USD0++

Early Stage: No Floor Price Test

In the initial stage of USD0++, users are allowed to freely mint and trade, and the protocol is tested for market demand and liquidity through verification design.

Transition Period: 1:1 Redemption Guarantee

In order to promote the market, the protocol introduces a 1:1 unconditional redemption mechanism to provide additional liquidity protection.

Final Stage: Dual Exit Mechanism

The current USD0++ offers two withdrawal options to meet different needs:

Conditioned exit: Users can redeem early at a 1:1 ratio, but must forfeit some future earnings.

Unconditional withdrawal: redeem at the floor price (currently 0.87 USD0), gradually converging to 1 USD, retaining prepaid rewards.

The community has not yet depegged from the shadow of LUNA/UST

The depeg turmoil of USD0++ highlights the fact that the on-chain Stable Coin project is still shrouded in the shadow of LUNA/UST, and there is little confidence in the stablecoin depeg and its stabilization mechanism. In addition, many investors who have adapted to the 1:1 redemption guarantee suddenly feel deceived by the different exit mechanism, causing market fluctuations. Investors should closely monitor the details of the upcoming exit fees and early unlocking mechanism, make rational decisions based on their own risk tolerance, and maximize profit potential.

This article USD0++ depeg turmoil: withdrawal and restructuring cause panic, challenging USUAL economic market mechanism whether to buy or not. It first appeared on Chain News ABMedia.