TrueUSD (TUSD) Depegs as Prime Trust Fallout Triggers Reserves Imbalance on Curve Pool

TrueUSD (TUSD), a stablecoin, has experienced another depegging event against Tether (USDT) on the Binance and Binance.US exchanges, marking the second time this month. This occurrence follows the fallout surrounding crypto custodian Prime Trust, which was recently placed into receivership after BitGo withdrew its bid to acquire the company.

As a result of the exposure to Prime Trust, TUSD witnessed a decline to 0.9974 against USDT on Binance and 0.80 on Binance.US. Notably, the reserves on the Curve pool have become further imbalanced, surging beyond 70%. Consequently, opportunistic whales and investors are taking advantage of arbitrage opportunities by swapping TUSD for stablecoins like USDC and others.

The implications of this depegging event and the subsequent reserves imbalance have raised concerns among notable crypto experts. Adam Cochran, The Wolf Of All Streets, and Parrot Capital have taken to Twitter to caution about the risks associated with TUSD depegging. Furthermore, the reserves attestation for TUSD was provided by The Network Firm (formerly Armanino), the same audit firm responsible for conducting audits for FTX.US. This has sparked criticism and skepticism, as Cochran pointed out the connection between the auditor and the FTX scandal, questioning their credibility.

Binance, one of the leading cryptocurrency exchanges, had started supporting TUSD stablecoin after the US regulator ordered Paxos to halt the minting of Binance USD (BUSD) stablecoin. The majority of TUSD reserves are held in Prime Trust, along with First Digital, Capital Union, Manual, and BitGo. The real-time reserve balance indicates that the token supply of TUSD stands at 3.139 billion, with USD-denominated collateral held in accounts amounting to $3.14 billion.

The fallout surrounding Prime Trust and its impact on TUSD has prompted a series of developments in the stablecoin market. The reserves imbalance on the Curve pool serves as a significant indicator of the challenges faced by TUSD. As whales and investors seek alternative options, the stability and reputation of TUSD come into question. The depegging event highlights the importance of robust custodian arrangements and transparent reserve management for stablecoins, as their value and reliability depend on these crucial factors.

The market will closely monitor the future of TUSD and its ability to regain stability and investor confidence. As the fallout from the Prime Trust disaster continues to unfold, it serves as a reminder of the inherent risks and challenges associated with stablecoins and the need for rigorous oversight and due diligence in the custodial arrangements of these digital assets.