On Wednesday Trueusd, a stablecoin designed to be pegged to the US dollar, experienced a sudden bump in price after Binance announced support. The news caused Trueusd (TUSD) to rise by an unprecedented 40% before eventually subsiding. Trust Token, the coin’s developers, have now explained to news.Bitcoin.com how this sequence of events came to be.
Also read: “Stablecoin” Trueusd Pumps After Binance Listing
Trueusd and the Moon Mission That Wasn’t Meant to Be
As reported on Thursday, TUSD pumped to $1.39 off the back of news that Binance would be listing the supposed stablecoin. Binance has since postponed its listing of the token, pushing the event back by a few days “to prepare for sufficient liquidity”. Trust Token, for its part, has responded to the incident in a blogpost, writing:
TrueUSD saw a large, sudden increase in demand after Binance first announced that they are listing TUSD. We believe that bots (and some misinformed traders) purchased TrueUSD as soon as the announcement was made.
The post continues: “Generally, our policy is that “redeemability leads to stability.” The value of a TrueUSD token is that it can be redeemed for one US dollar. There will only be as many tokens in circulation as there are dollars in the escrow account to collateralize the tokens. In the long run, this feature precedes price stability, since the price will return to $1.00 (as it did today) as long as the token continues to be redeemable.”
Trust Is Earned

Assuaging concerns that TUSD could dip discernibly below $1, Rafael Cosman said:
Price stability is maintained by market-making incentives. Today, market-makers buy TrueUSD for $1.00 directly from the bank, anticipating that if the price hits even $1.01 they can arbitrage some profit. The opportunity for redemption incentivizes market-makers to keep at $1.00 and not below: if the price was to dip to $0.99, then market-makers could buy it and redeem it for $1.00. Market-makers would quickly scoop in and buy all the “sell” orders for below $1.00 until none were left and the price returned to $1.00.
Bot or Not?

Stablecoins are still highly experimental at this stage, and while some “stable bears” believe perfect dollar parity will never be reached, others are confident that anomalies such as that which befell TUSD will be ironed out in time. As Trust Token acknowledged, even “the most stable of stablecoins will occasionally experience variance.”
Do you think occasional volatility is inevitable with stablecoins? Let us know in the comments section below.
Images courtesy of Shutterstock.
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