ron Bank Euro (IBEUR), a low-cap alternative stablecoin, is currently experiencing a crisis as it faces challenges in maintaining its peg after a significant 60% drop in value. This article explores the reasons behind the value drop and the uncertainties surrounding the stablecoin's ability to reestablish its peg.
Iron Bank Euro's Value Drop
IBEUR, with a $3.7 million issuance, experienced a sharp decline in value, dropping from $0.97 (€0.89) to as low as $0.39. This drop was a result of disruptions in IBEUR's main trading pool, leading to an imbalance in the asset markets. Despite a partial recovery to $0.82, IBEUR is currently trading at $0.70 (€0.64), below its intended peg of €1.
Uncertain Path to Repegging
According to sources close to the project, IBEUR is not actively engaged in any peg maintenance activities, and the treasury liquidity required to stabilize the asset is lacking. This lack of action raises concerns about the stablecoin's ability to swiftly regain its previous price level.
Potential Solutions for Repegging
In order to reestablish the peg, the Keep3r Network Telegram chat administrator, Funk, suggested potential paths for repegging. One option is for the Keep3r treasury to trade liquid assets for IBEUR at a discount and utilize the acquired IBEUR to pay down outstanding borrows with Iron Bank. This strategy aims to stabilize the asset and restore confidence in its peg.
Depeg Triggered by Single Trader
The depeg incident was triggered by a single trader who withdrew nearly $900,000 in USDC liquidity from the Curve pool, which primarily supports trading in IBEUR. This withdrawal created an imbalance in the pool, causing it to be weighted towards IBEUR and lacking sufficient USDC liquidity for proper trading alignment. Waiting for the curve pool to readjust and halting the credit borrowing contract were suggested as potential steps to address the depeg issue.