The algorithmic stablecoin Neutrino (USDN), which is backed by the native token of the proof-of-stake Waves protocol, has fallen below the U.S. $0.80, losing its US dollar peg.
According to CoinGecko, Neutrino USD was trading for just $0.82 (18% drop) as of April 4th at 3:24 IST. USDN, the flagship stablecoin of the Waves blockchain, now has a market cap of around $859 million resulting from the dangerous deviation from its US dollar peg, putting its very existence in jeopardy.
To maintain the one-to-one relationship, most hold assets such as dollars in reserve, whereas algorithmic stablecoin Neutrino, can expand and contract supply by burning or minting WAVES tokens. And on April 4th the DeFi protocol showed a healthy 2:1 backing ratio.
The Neutrino protocol’s ability to issue USDN is linked to the price of WAVES. And, since its all-time high of $64 on March 31, the WAVES price has dropped 52.3% to $33.5 on April 4 at the time of writing.
If it continues to fall, USDN risks losing its support and triggering another sell-off. To avoid this, Neutrino has called an emergency governance vote, which would significantly increase swap limits for Neutrino token NSBT tokens.
Several Twitter accounts accused the Waves team of manipulating the price of its native token through its DeFi lending platform Vires Finance last week.
Waves founder Sasha Ivanov denied the allegations, accusing Alameda Research, a quantitative crypto trading firm led by FTX’s Sam Bankman-Fried, of launching a campaign “fueled by a crowd of paid trolls” against WAVES in order to honor their short positions in the coin.
Waves was accused of artificially inflating the value of the WAVES token. The pump and dump is the most common offender in a market manipulation scenario in the crypto market. Regulators warn the general public about crypto tokens in order to keep them from becoming victims of many such market manipulation tactics.
However, regulations in favor of accepting the new technology with adequate caution can lead to confidence in the general public to use such stablecoins as a form of payment. Along with that wave, the U.K. government announced to regulate stablecoins and also issue NFT to be inclusive of the crypto community.