WAVES, the native token of Waves, has lost approximately 54% in just 7 days in the month of April, from trading at a peak of $62.36 a week ago, to currently trade $28.69 as of the time of this writing.
In March, WAVES, a multi-purpose blockchain platform that supports various use cases including decentralized applications (DApps) and smart contracts, had a significant rally, starting the month of March trading at $16.22 and ending the month of March trading at $54.61, representing a 236.7% rally. The rally seen in the market is a result of three consecutive updates which are the migration to Waves 2.0, the launch of a $150 million fund and the partnership with Allbridge.
However, in April, the token has lost over 50% of its value due to Neutrino Dollar (USDN), a stablecoin issued through Waves-backed Neutrino protocol, losing its U.S. dollar-peg on the 4th of April, amid speculations that it could become insolvent in the future.
What you should know
- USDN which is supposed to be a stablecoin pegged to the United States dollar dropped to as low as $0.822 on April 4 with its market capitalization also diving to $824.25 million, down 14% from its year-to-date high of $960.25 million.
- The stablecoin’s decline happened despite Neutrino’s claims of backing its $1-peg via what’s called an over collateral, which is when the total value of Waves (WAVES) tokens locked inside its smart contract is higher than the total USDN minted, also called the backing ratio.
- However, Neutrino smart contract’s backing ratio came out to be 2.62 on April 4, according to official data, underscoring that it had adequate funds to back USDN’s dollar-peg by 1:1; despite the decline, we have seen in the last 7 days.
- The selloff occurred also due to findings from a pseudonymous analyst, who accused Waves of artificially pumping WAVES by 750% in the last two months by; collateralizing USDN to borrow USD Coin (USDC) on the Vires.Finance lending platform, using the proceeds to purchase WAVES, converting the tokens to USDN and redeploying them into the Vires.Finance pool to borrow more USDC. The analyst, 0xHamZ on twitter, concluded that a decisive WAVES’ price crash would make USDN insolvent.
- Waves founder, Sasha Ivanov, denied the allegations, noting that one cannot move markets of more than $1 billion daily volume by borrowing a few million.
- He further accused Alameda Research, a quantitative crypto trading firm headed by FTX’s Sam Bankman-Fried, of launching a campaign “fueled by a crowd of paid trolls” against WAVES to honor their short positions on the coin.
- Due to these allegations, Sasha is now championing a proposed system change that would make it impossible to borrow large amounts of WAVES tokens through the system’s primary decentralized exchange (DEX), Vires Finance.
- Because WAVES is a relatively thinly traded asset of little interest to institutions like hedge funds, it makes it nearly impossible to borrow outside of Vires Finance.
- Borrowing an asset is essential to shorting or betting its price will fall. So, the Waves proposal would in essence make it very difficult or impossible to short the WAVES token.
It is still not actually clear that Alameda is engaging in a WAVES short on its own account. On Twitter, Ivanov claimed that a $30 million borrowing of WAVES through Vires can be linked back to Alameda. A representative for Vires declined to clarify the source of that information, and some have argued the move amounts to Ivanov doxing a user.
Sam Bankman-Fried on Twitter dismissed allegations of a coordinated “FUD” publicity campaign as an “obv bulls**t conspiracy theory.”
