Waves has experienced a brilliant price rally since the end of February, which brought investors a juicy plus. The main reason for this was the Neutrino Dollar (USDN). This is an algorithmic stablecoin that works very similar to UST in combination with Terra or LUNA. The coverage of USDN is ultimately guaranteed with or by WAVES.
However, a chain of events triggered a collapse of both USDN and WAVES. For example, the value of USDN collapsed to 0.68 US dollars yesterday, which ultimately means that investors did not have confidence in the stablecoin's backing and therefore price pegging to the US dollar was lost.
However, it shows that at this point in time enough waves were available in the smart contract and the stablecoin had not lost its cover.
Founder blames Alameda
In a series of tweets, the Waves founder explained his take on the incident. Ivanov accused Alameda Research of deliberately intervening in the market and betting against Waves. Sam Bankman-Fried, boss and founder of Alameda and the stock exchange FTX, rejected the allegations in clear words.
Another explanation for the recent events is that the Waves team was accused of artificially inflating the price by borrowing USDN for USDC and eventually using it to buy WAVES. A spiral that ultimately cannot be kept going permanently, but forms a bubble that has to burst.
In the end, however, the Waves and USDN story shows one thing: Algorithmic stablecoins are not free of risks. Meanwhile, USDN has recovered but is still 8 cents below the $1 target. By contrast, Waves is still trading at $35 at press time, well below its all-time high. It now remains to be seen whether the $30 level can prove to be support or whether the fundamental weaknesses are too great.
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