Market reaction is up to normal as stablecoins face selling off following recovery changes

Stablecoin developer Usual introduced a major update to its USD0++ protocol on January 9, unveiling dual exit mechanisms aimed at enhancing the token’s long-term sustainability.

Stablecoin developer Usual introduced a major update to its USD0++ protocol on January 9, unveiling dual exit mechanisms aimed at enhancing the token’s long-term sustainability.

The double exit system offers users two redemption options: “conditional exit”, which allows a 1:1 redemption at the peg price of $1 but requires users to forfeit part of the accumulated rewards, and “unconditional exit” at the current minimum price of $1. $0.87, and is scheduled to gradually rise to $1 over four years.

Sudden changes to the protocol’s official documentation left many users scrambling for clarity.

Stani Kulichov, founder of Aave, commented on the situation in a post on X, emphasizing the risks associated with feeding immutable prices. His observations reflect broader concerns within the community regarding the effects of new recovery mechanisms.

The update led to significant market volatility, with liquidity providers on platforms like Curve Finance and Pendle reportedly seeing sudden shifts that resulted in hundreds of millions of USD 0++ worth leaving the DeFi ecosystem. This displacement raised fears of millions of dollars in liquidations.

In response to community concerns, Usual’s Decentralized Autonomous Organization (DAO) announced that it will cover any potential bad debts in non-migrable markets up to the current amount.

USD0++, the staked version of USD0, is designed as a token pegged to the dollar and fully backed by real assets such as US Treasuries. However, it now imposes a four-year ban period, which complicates immediate access for users.

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