Market Reactions
Investors were left stunned by a recent overhaul to the redemption process for Usual Protocol’s yield-generating token, sparking a notable sell-off in the decentralized finance (DeFi) market.
The unexpected shift to the USD0++ token redemption mechanism caused its value to dip below $0.90, while the governance token, USUAL, saw a fall of 17% before attempting a recovery.
Dual-Path Exit Controversy
Critics of the newly introduced “dual-path exit” option claimed it jeopardizes the token’s $1 peg and compromises the stability of DeFi liquidity pools.
Although the Usual Protocol team announced the change ahead of time, they acknowledged the messaging could have been clearer.
This shift led to significant consequences for the protocol’s USD0++ token, which is tied to its stablecoin counterpart, USD0.
The token plummeted to under 90 cents on the Curve decentralized exchange.
Additionally, USUAL, the governance token, saw a staggering 17% decrease in value throughout the day, although it made efforts to claw back some of those losses later.
Future Plans and Transparency
In response, the Usual Protocol team insisted that they had communicated the planned changes as far back as October.
Nonetheless, they recognized that their messaging lacked clarity.
Plans to activate a revenue switch by Monday were also announced, which aims to begin disbursing earnings to USUAL holders who agree to longer-term staking commitments.
According to the team’s statement, the misunderstandings surrounding USD0++ can be linked to confusion about the protocol’s mechanics, exacerbated by inadequate communication.
They expressed regret for the situation and pledged to improve transparency moving forward.
This episode serves as a stark reminder for cryptocurrency investors about the risks tied to DeFi products that offer enticing yields through token incentives.
Experts in the field caution that users must stay informed and understand the frameworks governing these systems to avoid panicked reactions that can fuel market volatility.
Currently, USD0++ is trading around 0.91 USD0 within the Curve pool, while the Usual Protocol’s total value locked (TVL) has dropped to below $1.6 billion.
Source: Coindesk
