Real estate-backed stablecoin USDR recently experienced a loss in its peg to the U.S. dollar due to a rush of redemptions that led to a depletion of liquid assets, including Dai (DAI), from its treasury. Tangible protocol, a decentralized finance project that aims to tokenize real-world assets, issues USDR, which is primarily traded on the Pearl decentralized exchange (DEX) running on Polygon.
According to a tweet by Tangible on October 11, all the liquid DAI in the USDR treasury was redeemed in a short period of time, resulting in an accelerated reduction in its market cap. The lack of DAI available for redemptions caused panic selling, ultimately causing the depeg of USDR from the U.S. dollar.
At around 11:30 am UTC, USDR witnessed a flood of selling that drove its price to as low as $0.5040 per coin. Although it recovered slightly to around $0.53 thereafter, it lost nearly 50% of its value. The developers of the project reassured the community that they would provide solutions to address this liquidity issue, emphasizing that the real estate and digital assets backing USDR still exist and will be used to support redemptions.
Despite this setback to the treasury, the official website of the USDR app stated on October 11 that its assets are still valued higher than the entire market cap of the coin. The collateral for USDR consists of 14.74% Tangible (TNGBL) tokens, which are part of the coin’s native ecosystem, and the remaining 85.26% is collateralized by real-world housing and an insurance fund.
Stablecoins are designed to always maintain a value of $1 on the open market. However, they can occasionally lose their peg under extreme market conditions. For example, Circle’s USDC fell to $0.885 per coin in March 2023 but regained its peg shortly thereafter. On the other hand, Terra’s UST lost its peg in May and has not recovered, currently valued at $0.01 per coin.
The USDR project team is actively working to address the liquidity issue and ensure the stability of the stablecoin. Despite the temporary loss in its peg, the underlying assets supporting USDR provide confidence in its long-term value and potential for redemption.