July 24, 2024
Chicago 12, Melborne City, USA
Blockchain News

Trader Takes Advantage of TrueUSD’s Banking Woes, Opens On-Chain Short Position

Recently, a trader has made a strategic move by opening an on-chain short position on TrueUSD (TUSD), a stablecoin. This decision came after the issuer faced challenges with its banking partner, Prime Trust, which led to the suspension of mints and redemptions. Let’s delve into the details of this intriguing development and explore its potential implications.

The Short Position Strategy:

Utilizing the Aave V2 lending platform, an Ethereum user deposited 7.5 million USDC as collateral and borrowed 4 million TUSD. Subsequently, the trader quickly sold the borrowed TUSD for USDC, a common tactic employed to take a short position on a specific asset. This manoeuvre allows traders to profit from a decline in the price of TUSD.

Troubles with Prime Trust:

The TrueUSD issuer recently disclosed that the minting of new TUSD through its custodial partner, Prime Trust, had been temporarily halted. Complicating matters further, the Nevada Department of Business and Industry’s Financial Institutions Division issued a cease-and-desist order against Prime Trust, adding to the uncertainty surrounding the stablecoin.

Issuer’s Response:

Addressing the concerns, the TrueUSD issuer clarified that the issues with Prime Trust do not affect its operations regarding fiat to stablecoin conversions. The company maintains multiple USD rails for minting and redemption, ensuring minimal disruption despite the situation with Prime Trust. This reassurance helps to maintain stability and instill confidence in TrueUSD users.

Stablecoin Standing:

Currently, TrueUSD holds the position of the fifth largest stablecoin in the market, trailing behind Tether USD (USDT), USD Coin (USDC), DAI, and BUSD. With a market capitalization exceeding $3.1 billion, TrueUSD has emerged as a significant player in the stablecoin ecosystem, as reported by CoinGecko.

Binance’s Influence:

TrueUSD experienced a surge in popularity when Binance, one of the largest cryptocurrency exchanges globally, adopted it. This move followed regulatory complications associated with Binance’s BUSD stablecoin. As a result, TrueUSD gained traction among users seeking a reliable and compliant stablecoin alternative.

The current on-chain short position taken on TrueUSD amidst its banking partner’s troubles highlights the dynamic nature of the cryptocurrency market. Traders are quick to identify opportunities and leverage them to their advantage. Nevertheless, the TrueUSD issuer remains resilient, assuring users that its operations are unaffected by the Prime Trust situation. As the stablecoin ecosystem evolves, TrueUSD’s continued growth and integration with major exchanges like Binance solidify its position as a trusted and valuable asset in the cryptocurrency space.