USD0++ continues to “break away from the anchor”, should we hold on or run away now?

मूल | ओडेली प्लैनेट डेली ( @ओडेलीचाइना )

लेखक: अज़ुमा ( @अज़ुमा_एथ )

Since Usual announced the cancellation of the 1:1 unconditional exit mechanism of USD0++/USD0 on January 10, USD0++ has continued to be discounted.

As of now, the maximum liquidity ratio of USD0++ / USD0 on Curve has tilted to 8.18%:91.82%, and the real-time quote of USD0++ is approximately US$0.93.

USD0 और USD0++

What is USD0 ? What is USD0++ ? What is the relationship between the two?

The so-called USD0 is a fully collateralized stablecoin issued by the stablecoin project Usual. USD0 is backed by various short-term U.S. Treasury bonds at a 1:1 ratio (similar to USDT and USDC, but the Treasury bonds do not need to go through the banking system), and the collateral assets can be redeemed at any time at a ratio of 1:1. This is why, when the panic surrounding USD0++ continues, USD0 has always maintained a good anchor.

The so-called USD0++ is the pledged version of USD0 , with a pledge period of four years. After staking USD0 , users can obtain USD0++ as a liquidity certificate token (LST) at a 1:1 ratio, and will receive pledge income paid in USUAL every day during the period (note: this means that the yield of USD0++ is volatile). In other words, USD0++ can be understood as a four-year bond of USD0 .

Cause of drastic change: adjustment of exit ratio

In the traditional financial market, the trading price of multi-year bonds like USD0++ in the secondary market is not fixed at 1:1, but is affected by multiple factors such as changes in credit risk, changes in bond terms, changes in liquidity demand, changes in yield expectations, etc.

However, in the early days of Usual, in order to attract more funds to deposit, Usual provided a temporary 1:1 unconditional exit channel. This actually means that users can enjoy staking without being restricted by the four-year staking period. After that, a large amount of funds poured in, and many users even began to conduct revolving loans on Morpho in order to further amplify their returns through leverage.

In the early days when USUAL was not launched, users staking USD0 in exchange for USD0++ was actually blind mining (because the yield of USD0++ was linked to the price of USUAL); later, USUAL continued to rise after its launch, which also stimulated users enthusiasm for staking; however, since the end of 2024, USUAL has begun to decline gradually, which has caused the yield of USD0++ to gradually decline, and users withdrawal tendency has gradually increased.

At this time, users can still redeem without loss through the 1:1 unconditional exit channel provided by Usual, which also makes the price of USD0++ always maintain a good anchor (the term bond is not quite accurate, but it is easier to understand). However, this channel will obviously not exist for a long time (otherwise the pledge will be meaningless). In fact, in a market environment with a stronger exit tendency, Usual still needs to forcibly maintain this exit channel through subsidies.

On January 10, Usual officially announced that it would no longer support 1:1 unconditional withdrawal and opened two new withdrawal channels:

• Conditional exit: Continue 1:1 redemption, but require confiscation of part of USUAL earnings. Details of this channel are planned to be released this week.

• Unconditional exit: redemption at a floor price ratio of 0.87:1, which will gradually recover to 1:1 over time.

As soon as the news came out, panic immediately began to spread in the community – (not considering the conditional exit mechanism whose details have not yet been finalized) you had 1 USD0++ , and you could exchange it for 1 USD0 yesterday , but today you can only exchange it for 0.87 USD0 , who wouldnt panic?

The market reacted instantly, and a large number of users immediately began to sell through the secondary market (whoever runs faster, whoever keeps more). Some users had to unleverage in panic, which further exacerbated the selling of USD0++ . Curve data shows that USD0++ / USD0 has touched a short-term low of around 0.9.

The current dilemma: hold or sell?

As the panic sentiment has relatively subsided, the current price of USD0++ is roughly around US$0.93, which is also the result of the current market game.

There are two main focuses in this game. One is the proportion of USUAL earnings confiscation required by the conditional exit channel; the other is whether Usual will activate the earnings switch in advance . The results of these two key variables will be revealed this week.

• Odaily Note: The so-called income switch allows Usual to share its income from real-world assets and protocol operations with the community. Usual expects monthly revenue to be approximately US$5 million, and the annual return rate will exceed 50% under current conditions.

First, let’s look at the first major focus, which is the proportion of profit confiscation for “conditional exit”. Considering that the Curve liquidity pool available for secondary resale of USD0++ has been seriously tilted and is on the verge of failure, the subsequent exit of USD0++ will mainly rely on the two major channels provided by Usual. Therefore, this ratio will directly determine the approximate fluctuation range of USD0++ in the short term:

• If the comprehensive confiscation ratio exceeds 13%, it is expected that USD0++ will continue to drop to around 0.87 USD – the unconditional exit 0.87:1 bottoming ratio will take effect;

• If the comprehensive confiscation ratio is lower than 13%, the USD0++ price is expected to continue to fluctuate and gradually stabilize at the discount level of the corresponding confiscation ratio . If 10% is confiscated, it is expected to fall again and stabilize around $0.9; if 3% is confiscated, it is expected to rise and recover to around $0.97.

In the long run, चाहे USD0++ can be effectively repaired depends more on the second focus, namely the activation of the yield switch.

As mentioned earlier, the trading price of multi-year bonds in the secondary market will not remain fixed at 1:1, but will be affected by multiple factors such as changes in credit risk, changes in bond terms, changes in liquidity demand, changes in yield expectations, etc.

There has been no change in the underlying mechanism of Usual and the collateral status of USD0 for the time being, so there is basically no change in credit risk.

पहले, the sharp discount of USD0++ due to the adjustment of the exit ratio could be attributed to changes in bond terms (adjustment of redemption ratio) and changes in liquidity demand (increased exit tendency, fast running, and leverage).

What remains is the change in expected yield. If the opening of the yield switch can effectively boost the price of USUAL, it will increase the yield of USD0++ , and then reverse the supply and demand of pledge. In this case, the liquidity pool of USD0++ on Curve will gradually balance (compared to 1:1 pledge, USD0++ can be obtained at a discount), and the price performance of USD0++ will no longer rely on the official exit channel, but will fluctuate naturally like a regular multi-year bond.

In summary, the current selling pressure surrounding USD0++ is more of a panic result after the recent sudden change in the exit mechanism. The operation of the Usual protocol itself has not suffered any systemic failures (but the acceleration flywheel in the rising mode has been temporarily broken). As far as the current situation is concerned, it is recommended to wait and see the results of the two major variables that will be determined this week before making any subsequent considerations.

This article is sourced from the internet: USD0++ continues to “break away from the anchor”, should we hold on or run away now?

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