We have thoroughly analyzed the recent instability of the USDC stablecoin and the domino effect it has caused on other stablecoins such as DAI and USDD. Our aim is to provide our readers with comprehensive information on the matter
Understanding the Cause of Instability in USDC Stablecoin
USDC stablecoin, launched in 2018, has quickly become one of the most widely used stablecoins in the cryptocurrency market. Its stability and transparency have made it a popular choice among traders and investors alike.
However, the recent instability of USDC has caused concern among market participants. The root cause of the instability lies in the fact that USDC is backed by a combination of cash and short-term US Treasuries. Due to the recent rise in interest rates, the value of these US Treasuries has decreased, causing the value of USDC to drop as well.
The Domino Effect on DAI and USDD Stablecoins
The instability of USDC has had a domino effect on other stablecoins such as DAI and USDD. DAI is a decentralized stablecoin that is backed by collateralized debt positions (CDPs) in the MakerDAO system. USDD, on the other hand, is a stablecoin that is backed by a combination of US Treasuries and commercial paper.
Since USDC is used as collateral in the MakerDAO system, its instability has caused the liquidation of CDPs, leading to a decrease in the value of DAI. Similarly, the decrease in the value of US Treasuries has caused the value of USDD to drop as well.
