Following the insolvency of Prime Trust, the stablecoin TrueUSD (TUSD) has come under attack, with traders appearing to be rushing to short the asset. This development comes after cryptocurrency custodian Prime Trust was unable to fulfill withdrawal requests and had its bid to be purchased by BitGo withdrawn. Prime Trust, known for its fiat to digital asset on- and off-ramps, had previously been struggling financially and was issued a cease-and-desist order by a Nevada financial regulator.
Despite claims from TUSD representatives that the stablecoin has “no exposure” to Prime Trust and maintains “multiple USD rails for minting and redemption,” traders continue to place short bets against TUSD. It has been reported that TUSD has paused routine attestations of the stablecoin, and on Aave, traders are paying up to 50% APY to short the asset. One user was noted to have placed a $4 million short on TUSD.
TUSD’s Curve Pool is also showing signs of concern, with its currency reserves reaching 61%. A Twitter user under the alias etheraltog pointed out that users attempting to redeem TUSD are instead having it re-minted to their wallets. Despite these developments, TUSD has managed to regain its $1 peg through midday Friday.
Though it seems there’s a lack of confidence in TUSD due to the alleged connection with Prime Trust, should TUSD manage to maintain its $1 peg and uphold its claim of having no exposure to the troubled custodian, worries among traders may diminish.
However, with some traders paying a high cost to short TUSD and skepticism surrounding the stablecoin’s future performance, it’s crucial for investors to carefully evaluate the situation and potential risks before making any decisions. This includes monitoring the unfolding developments around Prime Trust’s insolvency, TUSD’s ability to maintain its peg, and any additional information that might solidify or dispel the connection between the two entities.
Source: Blockworks
