As the market continues to lament losses in the debacle of Terra (LUNA) UST and LUNA, DEI, a stablecoin used as an collateral mechanism for third-party instruments built on a Fantom (FTM)-based decentralized finance (DeFi) protocol, it has failed to maintain its parity with the dollar, falling below 0.60 cent on Monday.
When the price of DEI hit an all-time low of $0.52, its market capitalization also followed, falling from almost $100 million to about $52 million. However, despite the depreciation of its stablecoin, DEUS Finance’s governance token DEUS went from $163.40 to $327.28, before falling to $255.36.
At the time of writing, DEI was priced at $0.66 with a market capitalization of $59 million. This is due to stablecoin fears sparked by the UST and LUNA debacle and the decision by Deus Finance developers to pause conversions of DEI into dollars. However, according to its official Telegram channel, DEI parity will be restored in the next 24 hours.
Although DEI is also an algorithmic stablecoin like UST, the DEI stablecoin is collateralized, meaning users can mint 1 DEI by depositing collateral valued at $1. These can be assets like USD Coin (USDC), Fantom (DAI), Dai (DAI), WBTC or DEUS.
As with UST, the DEI peg is stabilized through a mechanism involving the minting and burning of DEUS. When minting DEI, a DEUS collateral is burned unless other tokens are used as collateral. On the other hand, when converting DEI, DEUS is minted.
In mid-March, the DeFi project fell victim to a hack that resulted in $3 million worth of DAI and Ether (ETH) losses. Due to this, the platform decided to close its DEI loan contract. A day after the Deus Finance exploit, DeFi protocols Agave and Hundred Finance also reported exploits that resulted in the loss of various cryptocurrencies totaling $11 million.
Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
Investments in crypto assets are not regulated. They may not be suitable for retail investors and the full amount invested may be lost. The services or products offered are not aimed at or accessible to investors in Spain.