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The real estate-backed stablecoin USDR has lost its connection to the U.S. dollar following a surge in redemptions that depleted liquid assets like Dai (DAI) from its treasury, as disclosed by its project team.
USDR, which is supported by a combination of cryptocurrencies and real estate assets, is issued by the Tangible protocol, a decentralized finance initiative aimed at tokenizing housing and other tangible assets.
The primary trading venue for USDR is the Pearl decentralized exchange (DEX), which operates on the Polygon network.
An update on $USDR
In a brief timeframe, all liquid $DAI from the $USDR treasury was redeemed.
This resulted in a rapid decline in market capitalization.
Coupled with the absence of DAI for redemptions, panic selling occurred, leading to a depeg.
We are working on…— Tangible (@tangibleDAO) October 11, 2023
In a tweet dated October 11, Tangible clarified that within a short span, all liquid DAI from the USDR treasury was redeemed, which caused a swift reduction in market cap, adding:
"Coupled with the absence of DAI for redemptions, panic selling occurred, leading to a depeg."
USDR faced a significant sell-off around 11:30 am UTC, causing its price to drop to as low as $0.5040 per coin. It made a slight recovery to approximately $0.53 shortly thereafter.
USDR loses its peg on Pearl DEX. Source: DEXScreener
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Although the coin has lost nearly 50% of its value, the developers of the project have committed to providing “solutions” to the issue, stating that it is simply a liquidity challenge that has temporarily affected redemptions.
“This is a liquidity issue,” they remarked. “The real estate and digital assets supporting $USDR are still intact and will be utilized for redemptions.”
In spite of the treasury’s losses, the app’s official website indicated on October 11 at 9:57 pm UTC that its assets still exceed the total market cap of the coin.
USDR total backing vs. market cap. Source: Tangible.
14.74% of USDR’s collateral is made up of Tangible (TNGBL) tokens, which are part of the coin’s native ecosystem. The team asserts that the remaining 85.26% is backed by real-world real estate and an “insurance fund.”
Related: Insurance, real estate: How asset tokenization is reshaping the status quo
Stablecoins are designed to maintain a value of $1 in the open market. However, they can occasionally lose their peg during extreme market fluctuations.
Circle’s USDC (USDC), the sixth-largest cryptocurrency by market cap as of October 11, dropped to $0.885 per coin on March 11 when several banks in the U.S. collapsed, but it regained its peg by March 14. Terra’s UST lost its peg in May and has not recovered, currently valued at $0.01 per coin as of October 11, according to data from Coinmarketcap.
