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Neutrino Dollar Stablecoin Loses Peg, Drops 15% Amid Manipulation Speculation


Neutrino Dollar (USDN), a dollar-pegged stablecoin backed by the Waves protocol, has lost over 15 percent of its value due to accusations of market manipulation.

Not So Stable After All

USDN fell to US$0.82 on April 4, dragging down a large chunk of the currency’s market capitalisation – over US$200 million from its year-to-date high of almost US$1 billion.

USDN Chart. Source: CoinGecko

USDN is an algorithmic stablecoin whose supply can expand and contract by burning or minting WAVES (Waves protocol’s native token). Along with USDN, WAVES dropped nearly 50 percent from its all-time high of roughly US$64 on March 31; it is currently trading at US$30, as per data from CoinGecko:

WAVES Chart. Source: CoinGecko

When Did It All Start?

The massive sell-off began in response to concerns of manipulation, with the crypto community calling Waves “a Ponzi scheme” on Twitter. Pseudonymous analyst 0xHamz accused the project of borrowing USDC, another stablecoin, to buy the WAVES token, artificially pumping its price over 750 percent in the past two months (significantly, it surged 70 percent following the March 28 launch of Waves Labs).

As the price of WAVES increased, so did the interest earned by stakers, with 0xHamz breaking it down as follows:

  • the protocol collateralises USDN to borrow USDC on Vires.Finance, a liquidity protocol based on the Waves blockchain;
  • buy WAVES;
  • convert the funds to USDN;
  • use the proceeds to borrow more USDC on the Vires.Finance pool; and
  • repeat.

Waves CEO Dismisses Accusations

Waves CEO Sasha Ivanov dismissed the allegations and in turn accused Alameda Research – a quantitative crypto trading firm headed by FTX’s Sam Bankman-Fried – of manipulating WAVES prices through a “hostile FUD campaign” fuelled by a “crowd of paid trolls” to ultimately trigger panic-selling:

0xHamZ also accused the project of pumping WAVES under a Russian ETH narrative, which Ivanov also dismissed, stating that neither he (Ivanov) nor the Waves team had any ties with Russia.

Peter Guo, a researcher at Hong Kong-based crypto fund Babel, noted that WAVES’ price surge coincided with Russia’s invasion of Ukraine in late February.

In response, FTX’s Bankman-Fried dismissed Ivanov’s accusation, calling it an “obvious bullshit conspiracy theory”:

After the incident, Ivanov announced that Vires.Finance would be subject to a protocol change proposal under a new DAO (Decentralised Autonomous Organisation) to protect the protocol from market manipulation:

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