Right here’s a chart you by no means wish to see. It’s of the DeFi Titanium token, which in at some point went from being valued round $60 to $0. Even on the earth of crypto, the place large drawdowns are commonplace, 100% washouts are fairly uncommon, particularly in such brief a time.
The token is/was a part of an algorithmic stablecoin challenge known as Iron Finance. Stablecoins are fairly sizzling lately. Some (like USDT and USDC) keep a peg to the greenback by holding a basket of dollar-denominated property. Others (like Dai) are backed by overcollateralized crypto property. After which there’s this breed of so-called algorithmic stablecoins, which use a dual-currency construction and try to carry a peg by creating arbitrage alternatives between cash. See Frances Coppola’s walkthrough of how the steadiness mechanism was designed to work. Additionally for extra on the technical facets, you’ll be able to take a look at the description of another stablecoin project called Frax, from which Iron Finance was a fork.
This crash really continues a really lengthy line of algorithmic stablecoin tasks which have crashed and burned, as no one appears to have found out the way to nail it. The repeat failure of those tasks is a meme on crypto twitter.
As for what triggered this collapse? According to Rekt.news, the TITAN coin had develop into wildly overpriced (you’ll be able to see that surge on the chart). Then folks started promoting it — triggering a excessive quantity of volatility, overwhelming arbitrage alternatives and inflicting everybody to run to the door. And it’s doable that Dallas Mavericks’ proprietor Mark Cuban had one thing to do with the massive runup within the worth of the token.
Cuban, like a bunch of different folks lately, has been happening the DeFi rabbit gap and he even wrote a blog post about his enthusiasm this Sunday, which included this paragraph the place he highlights the TITAN token:
I’m a small LP for QuickSwap. I present 2 completely different tokens (DAI/TITAN) that allow QuikSwap to supply swaps between these two tokens. As you can see here, this pair is certainly one of many, and it’s also possible to see that based mostly on the .25 pct of quantity on this swap that Quickswap pays, my return on my preliminary $75k investment (based mostly on charges solely) as of this writing, is an annualized return of about 206% (Primarily based on the charges earned within the final 24 hours. This return share will differ everywhere in the map relying on the exercise.) However the cool factor is whereas I don’t get any further rewards for this pair (you studying this Titan and Quickswap ???), I’m presently the one LP on this pool, so I get 100pct of the charges. In each pool, the LPs, get a share of the charges based mostly on the proportion of the liquidity they supply.
So in alternate for offering the Liquidity each TITAN and Quickswap want for his or her companies, I get .25 of the transaction quantity for swaps between these two tokens. So long as I hold making return, I’ll hold my cash invested (Volatility can create mark to market losses). If not, I can instantly withdraw it (some platforms have a maintain interval or penalties) . Have sufficient LPs and the alternate is way extra capital environment friendly than an identical conventional alternate enterprise and that i get to make some cash!
BTW, if you wish to learn extra on the liquidity provision course of that he’s describing, and the way these markets work, definitely check out Justina Lee’s Businessweek piece on Sushiswap, which operates with an identical mannequin. Anyway it is doable that the eye he drew to the challenge helped trigger the large surge within the worth that then triggered the cascade of gross sales.
Final evening on Twitter, Cuban acknowledged having gotten hit like everybody else:
We’ve reached out to Mark to ask extra about how a lot he misplaced and the way he bought all in favour of TITAN within the first place, and have but to listen to again.