Amid the USDR depeg crisis, a trader swapped 131,350 Real USD (USDR) for 0 USD Coin (USDC), resulting in a total loss. Explore the implications of this event in the context of liquidity issues.
On October 11, during the real-estate-backed U.S. dollar stablecoin Real USD (USDR) crisis, a trader made a devastating decision, swapping 131,350 USDR for a mere 0 USD Coin (USDC), resulting in a complete investment loss.
This unfortunate event occurred on the BNB Chain via the decentralized exchange (DEX) OpenOcean, as reported by blockchain analytics firm Lookonchain on October 12. The swap took place as USDR depegged from its par value by nearly 50% due to a severe liquidity crunch.
Liquidity challenges on decentralized exchanges can lead to substantial slippage, sometimes reaching as high as 100%. The incident echoes previous cases, such as a trader attempting to exchange $1.8 million in Compound USD (cUSDC) for just $500 worth of assets through Uniswap v2.
USDR’s depegging crisis stemmed from user requests for over 10 million stablecoin redemptions. Despite being purportedly 100% backed, less than 15% of its $45 million in assets at the time were supported by liquid TNGBL tokens, while the rest were tied to illiquid tokenized real-estate assets.
Tokenized assets using the ERC-721 standard couldn’t be easily fractionalized for liquidity, and the underlying real estate couldn’t be swiftly sold, exacerbating the withdrawal requests. This convergence of issues eroded investor confidence, ultimately leading to a collapse.