What caused the stablecoin of RWA project Usual to collapse? How did the new exit mechanism lead to USD0++ decoupling?

What caused the stablecoin of RWA project Usual to collapse? How did the new exit mechanism lead to USD0++ decoupling?

What caused the stablecoin of RWA project Usual to collapse? How did the new exit mechanism lead to USD0++ decoupling?

What are USD0 and USD0++?
USD0 is a type of stablecoin whose value is fully backed by US government bonds. Users can pledge USD0 and convert it into USD0++. USD0++ is the key to passive income in the entire protocol, and users who lock it can receive $USUAL tokens as rewards. However, the pledge period for USD0++ is 4 years, during which no interest is generated. It functions more like a “zero-coupon bond” than a stablecoin. Users must wait until the end of the period to redeem it at a price of $1. The potential long-term lock-up condition has caught many early “freeloaders” off guard. In the current market environment, if calculated with a 4% annual return, the fair present value of USD0++ should be around $0.855.

What is the newly launched “Dual Exit Mechanism”?
In order to improve the economic model, the team has abolished the unsustainable practice of “freeloading” and introduced new exit options for withdrawing players:
Conditional Exit:

Users can redeem USD0++ at a 1:1 ratio but need to give up some of the accumulated USUAL rewards. This mechanism is expected to be launched next week and may require the burning of USUAL tokens to activate.

Unconditional Exit:

Users can redeem USD0++ at the current fixed price, which is currently set at 0.87 and will gradually increase to 1 over time, but they need to wait for 4 years.
After the introduction of the new exit mechanism, due to panic (many people are panicking about the bottom price of 0.87) and the withdrawal of DeFi players using leveraged mining, it is more reasonable for regular investors to choose to invest in high liquidity and more stable government bond ETFs or similar products rather than lock their funds for 4 years. As a result, a large amount of USD0++ is being sold in the market, causing an imbalance in its proportion in the Curve liquidity pool and resulting in a price detachment.
From the current situation, there is no shortage of reserves for USD0 itself, and the possibility of systemic risk is relatively low. However, it remains to be seen when major holders will be willing to enter the secondary market to fill the gap between the market price and the anchor price of USD0.