Everyone’s favourite new up only stablecoin @USDai_Official had a large correction today.
Has it exploded? No.
Is it something you NEED to be aware of if you’re looping USDai in any context? YES
This is time sensitive, so have a read to see if it affects your positions ⏰
1) mfs can’t read. I’ve seen multiple comments explaining this tweet from the USDai acc as an announcement that USDai’s hard mint cap is being raised in 2 days.
It’s not.
USDai’s price is over peg because they have reached their hard minting cap, which means the only…
Way to get it is by buying it off the market. More buyers than sellers? Number goes up.
What’s actually happening in this tweet isn’t an overarching cap increase, but functionally it has potential to have similar effect.
2) USDai’s price action (lol) was starting to get risky
A massive portion of buy pressure on USDai has come through @eulerfinance’s multiply function, which gives users access to 9x their original capital by using looped borrows.
Looping is traditionally a great strategy for stablecoin farming, but a positive depeg causes issues
This is because if I open a borrow loop at the top of price action (let’s say 1.05) I am buying less USDai with my USDT. $10 USDai is worth $10.5 USDT.
If the price then moves down, I have to pay back my $10.5 USDT debt with USDai that is now worth $10.2 USDT.
On a small scale this feels chill, but on a 100s of millions of dollars scale this opens up the token to serious risk of cascading liquidations, where 1 position liquidates, pushes the price down with its sell pressure and begins liquidating others.
To combat this risk the USDai team is winding down the current borrow market on Euler.
Have a read of the announcement below to make sure I’ve understood this correctly, but it looks like you’ll want to have closed any borrow loops within 48 hrs.
To replace this looping offering the USDai team are juicing up the autoUSDai strategies on @ConcreteXYZ
These strategies will now pay out 25x ALLO points + intrinsic yield and ARB incentives.
They will also pay out USDC rather than USDai, so you could also view the vaults
As a way to slowly exit out of your USDai position.
The boost in Allo will last 30 days, with ARB incentives also on a ticking timer, so make sure to track these vaults if you do transition over to them.
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