TrueUSD (TUSD) stablecoin, the fifth largest with a market capitalization of over $3.1 billion, has raised concerns about its state and reliability. With more FUD in the mix, we’ll examine potential hedging from a de-pegging event and DeFi options.
Prime Trust and Nevada Investigation
Bitco, a cryptocurrency custodian, planned to acquire Prime Trust, which partners with TUSD. However, Bitco announced it will not acquire Prime Trust, which reportedly experienced customer fund shortfalls prompting a Nevada regulator investigation. TUSD’s issuer claims Prime Trust does not impact their operations, but the Nevada Financial Institutions Division issued a cease-and-desist order against Prime Trust.
Pausing All Deposits
Despite claims of no impact, the network paused all mints and redemptions, preventing customers from redeeming or minting TUSD. TrueUSD also emailed customers stating redemptions were suspended due to Prime Trust’s failure. This contrasts with their public claims of no exposure, leaving customers unable to use TUSD as intended.
Where to Short TrueUSD?
If you believe TUSD will decrease in value due to controversy, short selling the stablecoin may be considered. This involves borrowing TUSD and selling it, aiming to buy back at a lower price after its value drops. TrueUSD can be borrowed on Aave’s V2 lending platform and Compound. TUSD’s deposit and loan interest rates on Ethereum’s Aave V2 have significantly increased, with the deposit rate exceeding 9% and the loan rate exceeding 18%. Therefore, be aware that you will have to pay a higher interest rate to borrow the stablecoin in order to sell it for other stablecoins.