USDR, a Stablecoin Tied to Polygon-Based Real Estate, Plummets by 40% within Minutes

USDR Stablecoin Depegging Event

USDR, a real estate-backed Polygon stablecoin, recently faced a significant depegging event, experiencing a sharp 40% drop in value in mere minutes. The crisis was triggered by the depletion of DAI reserves, leading to a rapid decline in USDR’s valuation.

The Background

Real USD (USDR) is a stablecoin operating on the Polygon blockchain, backed by tokenized real estate assets. Developed by TangibleDAO, it boasts a unique value accrual system integrated into its design. Unlike other digital currencies, USDR is collateralized by yield-producing real estate assets.

The Depegging Event

The depegging event occurred when USDR’s value dipped below its peg due to depleted DAI reserves. This sparked a basic bank run on the system, causing the stablecoin to plummet to $0.60 and further to $0.51 as of 11:52 am EST, losing 40% of its value in the process.

Cautionary Tale

This incident serves as a cautionary tale, highlighting the risks associated with high-yield opportunities in the crypto market. While USDR once offered attractive Annual Percentage Rates (APRs) as high as 20%, the abrupt depegging event underscores the significant risks involved in high-yield ventures.

Concerns and Recommendations

Advisors have recommended USDR holders to exit their positions due to the absence of DAI backing. Currently, only 7 million USDR holds immediate exit liquidity for the 67 million USDR in circulation, raising concerns about the stability of the remaining assets, which comprise illiquid real estate and insurance funds.

Collateralization Status

There are concerns regarding the collateralization status of USDR when excluding the project’s native TNGBL token. The DUNE dashboard indicates a questionable collateralization ratio. However, including the TNGBL token shows a collateralization ratio of 102%.

Self-Backed USDR

Interestingly, USDR’s dashboard reveals that a portion of the stablecoin is backed by itself, a practice raising eyebrows. Specifically, 62,810 USDR is listed as collateral for the stablecoin, adding to the concerns about its backing and stability.

In conclusion, the USDR stablecoin depegging event serves as a stark reminder of the risks associated with high-yield opportunities in the crypto market. Investors are urged to exercise caution and conduct thorough research before engaging in such ventures.