USDR collapse: A result of DAI’s retreat or a pre-planned rugpull?

• USDR and Tangible’s native token TNGBL collapsed in a move similar to the 2022 LUNA crash.
• The team told users that it was working on recovery but holders have been swapping their coins.

In the real world, an asset backed by the real estate market is considered to be strong. But in the unpredictable crypto world, Real USD’s [USDR] collapse may make market players question other projects with such fundamentals. 

Another day, another de-peg

At the time of writing, USDR, which was supposed to have a 1:1 dollar peg, and redeemed using a 1:1 DAI minting, had fallen to $0.53. According to CoinMarketCap, the decrease represents a 44.43% decline in the last 24 hours.

The slump may, however, be surprising to holders of the stablecoin. That is not just because of its presumed solid fundamentals. On 10 October, TangibleDAO, the team behind the yield-generating stablecoin put out a post on X (formerly Twitter), “bragging” about how new properties had been added to its treasury.

Usually, statements like this instill confidence in holders. In some cases, it even goes as far as enticing new participants, especially as it seems transparent. Unfortunately, not many would have predicted that doom was near for USDR.

Fundamentally, RealUSD does not just base its tokenomics on real estate. Instead, it claimed that the project flourishes on a value accrual system designed to bring 5% to 10% APY to USDR holders.

Like USDT, Tangible’s native token TNGBL also crashed. According to CoinMarketCap, the value of the token was $3.42— a 49.57% slump in the last 24 hours.

Tangible’s antics seem unclear 

TNGBL and USDR’s crash seemed similar to the Terra USD [USTC] and Terral Luna [LUNA] collapse of 2022. Recall that the founders of LUNA were culpable, and on-chain data seemed to confirm this USDR bias.

First, Emperor Osmo, a crypto research specialist, advised USDR holders to consider exiting their positions. This was because the asset had become highly illiquid and the DAI support seemed to have “disappeared overnight.”

A thorough assessment of Tangible’s treasury showed that there was no DAI in it, and the only liquid asset left was a $6.2 million insurance fund. From all indications, the Polygon-backed project collapse seemed like a case of prearranged rugpull.

For context, as a short form of “pulling the rug out,” a rugpull occurs when fraudulent developers tempt unsuspecting investors into what appears to be a legit and lucrative project. When investors have trusted the project enough, the developers disappear with the liquidity provided, leaving their holders with little to nothing.

However, TangibleDAO has come out to deny being involved in any form of deceit. According to the project, the USDR de-peg was a result of the aforementioned redemptions, alongside liquidations on its real estate asset, and panic selling.

Taking a cue from LUNA’s playbook?

While admitting to the current challenges, the DAO noted that the project was working on a solution. To start with, Tangible mentioned that it would liquidate its Protocol Owned Liquidity (POL) and insurance fund assets, and make it available for affected investors.

It also disclosed that it would be launching a pool of tokenized real estate called “Baskets.” According to Tangible, Baskets would be a vital component of USDR’s redemption. But it also highlighted that it could be a slower path to liquidity for its users.

Although the project encouraged its users to follow it on the USDR and TNGBL revival journey, most were not having it. For many, the public statement was similar to Terra founder Do Kwon’s “steady labs, deploying capital” reassurance before LUNA and USTC all went down the drain. 

Meanwhile, a host of USDR holders have started to count their losses. According to Polygon Scan, there was a surge in the number of USDR to USDC swaps. Hence, it is likely that the stablecoin value could drop lower than $0.53.

Even at that, Tangible’s wallet showed that it still held about 32.85% of USDR’s total supply, valued at $8.16 million.

Source: Polygon Scan

In a related development, Tom Wan, research specialist at 21co, gave his insights on the USDR de-peg. According to Wan, using illiquid assets to back liquid assets was a wrong move on Tangible’s part. So, it was unavoidable for DAI liquidity to run out after a huge redemption took place.