The USDR liquidity problem costs a trader 131,350 stable coins.
The USDR faced liquidity problems due to its illegal assets. During the crisis, a trader who exchanged USDR for USDC lost everything. An MEV bot arbitrage opportunity earned $107,002.
The stablecoin of the Real USD (USDR) recently found itself in the eye of the storm, revealing the pitfalls of a deflationary position.
On October 11, a liquidity problem caused a trader to exchange 131,350 USDR for 0 USDC, resulting in a complete loss. Here's what happened:
USDR Liquidity Problem
The USDR, a real estate-backed US dollar stablecoin, is facing a liquidity crisis as users demand more than 10 million stablecoins for redemption.
Despite being declared 100% backed, a shocking revelation emerged: less than 15% of his $45 million worth of assets is backed by liquid TNGBL tokens, and most of it relies on illegal real estate assets.
The inconsistency of these real estate assets stems from their tokenization according to the ERC-721 standard. This special requirement made it almost impossible to fractionalize these assets, creating a liquidity problem for investor redemptions. In addition, real estate assets cannot be sold quickly enough to meet withdrawal demands. Consequently, the USDR Treasury failed to honor these redemptions, leading to a crisis of confidence among investors.
Although it is fully supported, why did the USDR change: – Using an illiquid asset supporting a liquid asset
– USDR 100% supported. 50% of them come from statcoins and the rest from real estate.
– When there is a bankable (massive redemption USDR), the amount of Stablecoin money in… pic.twitter.com/OYhQ0twUUd
— Tom Wan (@tomwanhh) October 12, 2023
Expensive DEX exchange
During the USDR liquidity crisis, a trader tried to release their holdings of USDR by swapping BNB Chain through the decentralized exchange (DEX) OpenOcean. The catch is the extreme caution of the USDR, which has fallen to 50% of its real value due to liquidity problems.
In an unfortunate event, the trader received 0 USDC in return for 131,350 USDR. This means a complete and crippling loss on the initial investment. In the volatile world of DeFi, where slippage rates on DX can reach 100% during periods of poor liquidity, events like this serve as a stark reminder of the dangers at play.
Due to the Stablecoin USDR break, this guy traded $131,350 USD for 0$ USDC when he panic sold.
And the MEV bot successfully won $107K. pic.twitter.com/USLF1qkVDK
— Lookonchain (@lookonchain) October 12, 2023
The story presented an interesting scenario as the Maximum Extractable Value (MEV) bot stepped in to take advantage of the arbitrage opportunity. Realizing the huge price difference, this automated trading algorithm made a nice profit, making a staggering $107,002 in a well-timed arbitrage trade.
