WAVES and its native stablecoin also known as USDN are making headlines for all the wrong reasons.
In the most recent development, DAEA has issued a legal notice to USDN and Upbit crypto exchange has also updated the list of authorized crypto tokens by the exchange as USDN wasn’t among the approved tokens.
Following this news, investors have clearly stated that the price of Stablecoin is bound to go down.
The year 2022 has been one of the hardest years for algorithmic stablecoins, first Terra’s LUNA exploded, and moving forward Ethereum’s ETH is struggling and now WAVES’s USDN is about to explode.
It is important to understand that Algorithmic stablecoins are not fully merged with fiat currency, which means their price is not fully pegged to the price of Fiat currency. There are various other factors like how efficient these coins are in in-terms of asset backing.
These are the reason that algorithmic stablecoins are highly volatile and subjected to intense regulatory scrutiny.
That has been the case with USDN as well. But it is also a truth that algorithmic stablecoins are immensely popular within the crypto community.
Despite their fragile nature, their popularity is the reason that Cardano is working on a new algorithmic stablecoin project Djed.
However, Cardano has improved the concept of these tokens and their operational framework in order to avoid any issues in the future.
Worrying Signs for WAVES and Its Native Token USDN
On Friday, one of Korea’s biggest cryptocurrency exchanges (DAXA) warned the WAVES and its native digital token in the legal notice. As the result, the price of USDN declined and touched a new low at $2.05.
This legal notice was served because USDN has breached its peg with the fiat currency and still wasn’t able to reinstate its peg after 185 days were passed.
This legal notice has also forced Upbit to delist the USDN token from its protocol. Analysts clearly stated that after USDN is about to crash after that the other stablecoins are likely to crash.
It is also important to know that stablecoins are not the only coins that are rapidly breaking their pegs.
Tether’s USDT backing following the news of its insolvency is also in danger, as the result, those investors who loved stablecoins and invested heavily in these coins seemed concerned.
But according to analysts, the situation is only going to be worse. In most recent days USD is being bashed in the money market constantly failing to cross the level of resistance above $105.
As a result of this sluggish performance, stablecoins are also struggling to get some gain. Over the years USDT has lost many of its pegs.
Pressure Keeps Building Up from the Regulators’ Side
As the investors and backers continue to winder from algorithmic stablecoins, but the regulatory authorities are putting more and more pressure on stablecoins and bringing in new regulations that will force the stablecoins to maintain their peg.
Regulators have argued that breaking the peg means stablecoins are putting the investment of many investors in danger.
Moreover, as the price of USDN will further decline in the future, now is the right time to go for sell the option and rather than putting their money into the stablecoins avoid such risky trade.
There are many complex issues being faced by the fiat currency market such as interest rate hikes, high inflation, and the poor performance of the USD. All these concerns are a clear indication that stablecoins are not a feasible investment option for investors as of now.
Investors need to have a keen and thorough eye on all the news regarding the stablecoins and should not be flattered by the new stablecoin projects.
Moreover, for the survival of WAVES, it is important that USDN should restore its peg to the fiat currency as soon as possible. Any further delay will compromise the token’s legal credibility and market repute.