Kava Network’s decentralized stablecoin USDX has lost $0.76 in value against the US dollar after UST was used as collateral.
USDX dropped nearly $0.55 on Wednesday and is now trading at $0.76, below the dollar’s expectations.
What might cause USDX to lose parity with the dollar remains unclear, as Kava Network’s USDX differs from its stablecoin. Terra
An explanation that is likely to come from Twitter from Kava Labs, the development team behind the stablecoin, is that USDX has lost its peg due to the use of terraUSD (UST), the recently broken stablecoin algorithm, as one of its collateral, with UST accounting for it. Some USDX margin, along with other assets such as kava, cosmos, wrapped bitcoin and ether.
As UST dropped to $0.10 and lost more than 90% of its value in a week, liquidations dragged USDX off the peg by Scott Stuart, co-founder and CEO of Kava Labs, a development team working with Stablecoin, suggesting that liquidations may play a part. Cause USDX to fall off peg 1 dollar
Stuart claims that USDX will return to peg because it is not an algorithmic token like UST.
“USDX is not UST. Once UST has exited, USDX is expected to revert to its former state,” Stuart said.supplement
“UST is de-pegged and it poses a risk to the downstream protocols that use it,” Stuart said, adding that the UST risk in Kava has been excluded.
refer : LINK
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