The Neutrino Dollar (USDN), a stablecoin created in the WAVES ecosystem, has lost its parity against the US dollar (USD). As a result, the price of the stablecoin dropped by more than 20% on Monday (4).
Under normal conditions, USDN, like other stablecoins, should maintain 1-to-1 parity with the dollar. That is, a USDN should be worth exactly one dollar. But now USDN trades at around $0.77, according to data from CoinMarketCap.
The strong downward movement is due to an accusation leveled against the WAVES team. According to an investigation, users are accusing WAVES of manipulating the price of its token through decentralized finance (DeFi) platforms.
The charge was countered by Sasha Ivanov, founder of WAVES, who accused manipulation attempts aimed at devaluing WAVES and USDN. One of Ivanov’s accusations was leveled against the analysis house Alameda Research, which is owned by the FTX exchange.
Controversy of manipulations
Here’s the factual part: USDN’s backing against the USD started to be lost on March 31st. A user known as 0xHamZ accused WAVES of taking advantage of recent valuations to print more USDN.
In addition to being a stablecoin, USDN can be used to earn income within WAVES. But 0xHamZ warned that WAVES would be printing more USDN, while stablecoin backing was decreasing.
He also stated that the USDN fee has gone against the grain of other stablecoins, whose supply has been dwindling.
“We recently saw USDN achieve the fastest issuance rate in history. In the last 4 weeks, USDN offering has gone from $475 million to $875 million. This represents an increase of 85%, while the DAI registered a decrease. Why would anyone want to hold USDN?” he asked.
Then 0xHamZ accused WAVES of issuing USDN to buy more units of their token, WAVES. In practice, the network would be helping to fuel an artificial demand for the token, causing its price to rise.
WAVES is the biggest ponzi in crypto
It has recklessly engineered price spikes by borrowing USDC at 35% to buy its own token
Continuous WAVES market cap growth is needed to keep the system stable
WAVES will eventually crash and USDN will break with it
You’re on notice🧵
— 0xHamZ (@0xHamz) March 31, 2022
The user accused WAVES of acting as a “pyramid scheme”, warning that this practice would cause the network to crash.
The controversy also affected the price of WAVES, which operates down 23%, quoted at US$ 38.11. About $200 million was taken out of the WAVES ecosystem from these devaluations alone.
WAVES CEO responds
Sasha Ivanov, CEO of WAVES, denied all allegations of manipulation and countered. Citing both 0xHamZ and Alameda, he wrote a long thread on Twitter about the case. The CEO said the manipulation attempt took place by Alameda, accusing it of spreading fear about WAVES in the market.
Ivanov stated that he never sold any WAVES and therefore did not profit from the token’s appreciation. The CEO released a survey in which, according to him, an email linked to Alameda registered an account on vires.finance, the DeFi protocol that operates on WAVES.
In this regard, the CEO accused Alameda of borrowing WAVES from vires.finance and then selling them on the market, causing the price to fall. “(The loan process) started at the same time as the campaign against WAVES,” Ivanov said.
The account started borrowing $waves around March, 20, sending it to Binance – https://t.co/OoSC50EaHl, obviously to sell and make the price go lower. It started around the same time when the FUD campaign started.
— Sasha Ivanov 🌊 (1 ➝ 2) (@sasha35625) April 3, 2022
Alameda Research has not commented on the allegations at the time of writing.
New proposal divides opinion
On Sunday, Ivanov presented a new governance proposal aimed at improving aspects of WAVES. The proposal aims to drive speculative activities out of the network by lowering the settlement threshold and limiting interest payments.
“In order to avoid price manipulation and protect the ecosystem, we propose to temporarily lower the settlement threshold for waves and USDN loans to 0.1%. In addition, I propose to limit the maximum APR (annual percentage rate) time to 40%,” the proposal reads.
However, WAVES users spoke out against the proposal for two reasons: first, the changes would favor insiders, people with privileged information. On the other hand, small users who use the platform in good faith would be getting a “pull of the rug” if the proposal is indeed approved.
Meanwhile, vires.finance is losing liquidity – around US$ 300 million has already been withdrawn from the protocol in just three days.