With the crash of Terra, Celsius, and more recently 3AC and Voyager, a pattern starts to emerge. It turns out that high yield returns on crypto deposits and algorithmic stablecoins are not actually sustainable in a bear market (to anyone’s surprise) and as a result, crypto companies whose value proposition fit the above criteria find themselves in dire straits — not the band, but does resonate with their hit single “Money for Nothing”.
Here’s a list of crypto services that you should probably avoid:
The only thing stopping USDD from causing as many ripples as LUNA is the fact that the USDD market cap is sitting at only $700m, compared to UST’s former $18b market cap.
Much like LUNA, Tron’s USDD maintains its peg with the help of the governance token, allowing users to either mint or burn Tron if the USDD price goes under or over $1. Tron’s USDD has recently lost its peg and was trading at $0.97 but was able to recover from it. Tron aims to keep their stablecoin over-collateralized in order to ensure its peg. USDD is currently overcollateralized by a ratio of 3 to 1 with a total of $2.2b in TRX, BTC, USDC and USDD. However as USDD adoption grows, it will become a financial challenge to maintain this ratio, therefore exposing the Tron ecosystem to additional risk.
Nexto is a cryptocurrency lender providing financial services similar to Voyager and Celsius. Nexo allows users to deposit crypto and choose how they would like to lend them. At the time of writing, their website promises up to 16% returns on crypto deposits paid out daily. They also promise to pay up to 12% on most stablecoins. Remember that if you don’t know where the yield comes from — you’re probably it.
Discussions around Nexo’s sustainability on reddit echoed the sentiment that their business model is mostly sustainable during a bull market as this redditor remarked.