STBL Protocol’s new stablecoin has already dipped below its $1 target shortly after launching, indicating some liquidity issues.
On Friday, October 10th, the stablecoin USST was introduced by STBL, a platform co-founded by one of Tether’s original creators. Within hours of its arrival on Curve, USST fell to $0.96, which raised eyebrows regarding its reliability.
As of now, USST is trading close to $0.9776, representing a 1.5% drop over the past 24 hours, with a market cap nearing $967,000 and only 52 holders, according to available data.
The liquidity in the Curve pool was about $965,000, with a trading volume of $484,000 in the last day and net outflows around $466,000. Notably, there have been 50 recorded transactions during this period.
Earlier today, STBL announced a partnership with Ondo Finance related to USST. The partnership’s total value is $1.76 billion, featuring Ondo’s USDY as the primary collateral for USST. A press release shared with The Defiant mentioned that up to $50 million in USST will be backed by USDY, which is secured by US Treasuries and cash deposits.
STBL functions as a decentralized protocol, offering both the USST stablecoin and another product known as the yielded NFT YLD that users earn when minting USST. One co-founder is Reeve Collins, previously the CEO of the USDT issuer from 2013 to 2015. Currently, Tether’s USDT makes up a significant portion of the global stablecoin market, with a market cap of $177 billion, accounting for over 58%.
The initial drop below the dollar peg underscores the challenges that new stablecoins face in gaining trust, especially given the importance of liquidity depth, transparency, and dependable collateral for maintaining their dollar value.
What It Means
Katie Romero, the CEO and co-founder of the crypto growth firm BABs, mentioned that the early wobble in pegs is often typical for new stablecoin launches. According to her, the depegging appears to be more about liquidity adjustments rather than inherent issues. She elaborated, “Shallow pool depth, rising incentives, and uneven minting/redemption flows can amplify minor sell-offs.”
Similarly, Kadan Stadelmann, CTO of Komodo Platform, voiced that while USST is not in a dire financial state, there are risks involved. He noted that small fluctuations in pegs are common early on, but if these aren’t resolved, it could harm the entire STBL ecosystem and have ripple effects on other stablecoin systems. Historically, stablecoin projects have addressed peg issues with measures like yield boosts, reserve infusions, and buybacks.
Romero also pointed out that if market flow functions well, market makers usually step in to stabilize prices as soon as profits start emerging.
STBL Token Drop
In the meantime, STBL, the governance token for the ecosystem that launched on the BNB Chain last month, has seen significant declines over the past 24 hours. This likely reflects a drop in confidence following the shaky start of USST. Currently, STBL is trading around $0.17, which is an 18% decrease for the day and over 36% for the week.
“This isn’t a death knell, it’s more like a reliability evaluation. STBL is under considerable strain,” Romero remarked. She noted that today’s token slump illustrates a feedback loop between the credibility of governance tokens and how robust stablecoins seem—or at least this is what has happened in earlier-stage ecosystems, similar to the collapse involving Terra’s UST.
She believes that while the depegging of USST isn’t monumental in cryptocurrency terms, it can still create a temporary ripple effect on investor trust. “Social sentiment metrics showed that negative feelings spiked 3.2 times after the peg fell, echoing that narrative more quickly than liquidity could stabilize,” she explained. Stadelmann echoed her concerns, stating that the STBL tokens are suffering from the consequences of USST’s depegging.
“The project’s overall viability is now under scrutiny,” he commented. “Everyone is watching to see how they handle these issues and if they can quickly restore confidence.”
