The news was that defogging occurred in USDX, a stable coin based on KAVA, and that 1USDX was trading at $0.65.
It was around midnight when the first news of defogging appeared in the media, but then I saw the price plunge 32% in 30 minutes by 0:30 and then recovering rapidly.
Even if they quickly took the short position and made a huge profit, if they didn’t escape in time, those who boarded the short position could suffer a big loss.
This is how a high percentage of my chat room entered the short position as soon as they heard the news, and made a profit of all 30% of the price change with 20 times leverage. That’s exactly the time on the bottom right. 바이비트 먹튀 I couldn’t enter the position because I wanted to write a blog. There are already articles about this in the virtual currency-related community even though it is late at night.
It was the moment when the whole situation was over within 30 minutes of the news.
Stablecoin’s Depegging problem, which LUNA swept since a few days ago, is still not being solved. Immediately followed by USDT defogging, and even the KAVA stable coin defogging occurred again.
Unstable coin-unstable abnormalities continue to occur, which is not a normal problem.
First, let’s look at KAVA Coin and related ecosystems.
What kind of coin is KAVA?
Cabacoin is a coin based on COSMOS. Cosmos is a coin for an interchain that connects different blockchains, and it acts like an “Internet of Blockchains” that allows each coin to interact with each other by connecting it to a network.
Kaba is a decentralized financial platform that uses this Cosmos network to hold Bitcoin, Ethereum, Ripple, and other digital assets as collateral and lend out USDX, a stable coin.
Kava collateralizes major cryptocurrencies and brings them to the Cosmos platform. And it allows users to create a ‘debt position’ to leverage cryptocurrency.
You can think of Kaba as a cryptocurrency loan business. First of all, Kaba holders can set up various cryptocurrencies as collateral and debt-backed positions on the platform. After that, you can borrow USDX, which is a fixed stable coin for $1.
If the Kaba owner wants to get back the cryptocurrency he’s secured with, he’ll have to pay back the fee with the USDX he borrowed This is the same system as a bank loan.
The key to maintaining this system is ‘Collateralized Debt Position (CDP).
This ensures that USDX stable coin loans are always secured. If the borrower fails to keep the collateral above the required level, the caba liquidator module collateralizes the failed collateralized position and sends it to the auction module for sale.
In short, the caba is a coin in the ecosystem of Cosmos that works to keep the stable coin USDX pegging. Just like LUNA played the role of LST pegging in the Terra ecosystem.
Just as LUNA plunged a few days ago when UST, the stable coin of the Terra ecosystem, defecated. When USDX, a stable coin, defecated in the Cosmos ecosystem, KAVA plunged.
However, the difference is that UST was a stable coin that did not hold collateral based on the algorithm, and USDX was a stable coin that held collateral.
Considering the seriousness of the problem, I think that the fact that even USDX, the stable coin that holds collateral, once fell to $0.65 can damage the reliability of the stable coin as a whole.
However, UST is considered the reason for the defogging of USDX, the stable coin of the cosmos ecosystem. As mentioned above, the Cosmos ecosystem runs a loan business with various virtual currencies as collateral. One of the coins I held as collateral was UST. When UST and Luna collapsed, even the stable coin of the Cosmos ecosystem, which used it as collateral, was damaged.
KAVA CEO Scott Stuart expects USDX Pegging to recover soon after removing UST from the collateral pool. Still, it is possible to criticize the fact that it has already been a few days since the Luna incident occurred and has yet to take action.
What’s the future of Stable Coin?
Kim Hyung-joong, a professor at Korea University’s Graduate School of Information Protection and president of Fintech Korea, cited “anchor protocol” as the reason for the plunge accompanied by Luna and Terra.
Stable coins are not all dangerous. For example, the Makerdao and Dai (DAI) systems, which are almost identical in algorithms to the Terra and Luna systems, are operating well. The difference is that Terra and Luna systems put the anchor protocol at the forefront. There can’t be a system that guarantees 20% per year.
Professor Kim Hyung-joong said that the anchor protocol attracted too many investors and then left at once, adding to the market’s anxiety over San Taek-ke.
On the other hand, as both Terra and Luna were virtual currencies at the top of the market capitalization, there are concerns that this could shrink not only Stablecoin but also the entire market as a whole.
The U.S. financial authorities also mentioned the situation. U.S. Treasury Secretary Janet Yellen told a hearing on May 10, “I’m well aware of the Terra situation. “We need to protect consumers through stable coin regulations,” he said, hinting at the possibility of regulations on stable coins. This could overshadow the concept of cryptocurrency itself, which is the motto of decentralization.
Meanwhile, Professor Kim Hyung-joong,
Stable coins have improved price volatility, not stability of the financial system. Stable coins to be issued in the future should be evolved to ensure financial stability.
He also pointed out that.