The Hidden Danger in the Cryptocurrency World: Could This be the Second Terra (LUNA) Incident?

Falcon USD (USDf), which is rapidly rising in the cryptocurrency market and introduced as the “synthetic dollar”, has caused concern by losing its stability despite being launched only a few months ago. USDf, backed by controversial market maker DWF Labs, fell below the $1 peg in the morning hours, dropping to $0.98, according to CoinMarketCap data. USDf, which has a market value of $540 million, is stated to be backed by “diversified crypto assets,” although growing concerns about the quality of these assets have led to speculation that Terra could trigger the first major stablecoin crisis since the UST crash. LlamaRisk, a risk consultancy for decentralized finance (DeFi), has raised concerns about the inclusion of USDf as collateral on lending platforms. In a Resupply forum post published last month, it criticized the lack of transparency in USDf’s reserve structure and the nature of the assets used as collateral. The platform was previously the victim of a $9 million hack last month. Following the criticism, DWF Labs’ managing partner Andrei Grachev made a statement on X (formerly Twitter). He provided information about Falcon’s reserve structure, transparency principles, and risk management strategies. He stated that 89% of USDf is backed by stablecoins and Bitcoin (BTC), while the remaining 11% consists of altcoins. Grachev also suggested that “some competitors are running coordinated FUD campaigns because they are unable to compete fairly.” According to Falcon Finance’s “Transparency Dashboard,” USDf is 117% collateralized with $635 million worth of crypto assets. However, only $25 million of these reserves are on-chain, while the remaining $610 million are held off-chain. Only 15% of this amount is in stablecoins, while 85% is classified as “other.” Related News: The Country Where Tether (USDT) Is Keeping Tons of Its Gold Has Been Revealed - Here Are the Details In the latest reserve report, independent auditor HT Digital stated that asset valuations were calculated only with CoinGecko price data, but important factors such as liquidity, volatility or the price impact that may occur if the assets are offered for sale were not taken into account. It was also announced that no review was conducted on the control, ownership or security of these assets. Following the criticism, Grachev said that the Dashboard will be updated next week and the distinction between stablecoins, BTC and altcoins will be clearly listed. Despite being a new company in the crypto market, DWF Labs has been in the news for its lack of transparency, accusations of manipulating low-volume tokens, and allegations of wash trading by a former Binance employee. Some analysts believe that DWF Labs is trying to “cash out” its portfolio by printing USDf with illiquid or small-cap tokens. A similar method was used by Curve Finance founder Michael Egorov last year, causing a massive liquidation chain that caused the CRV token price to drop by 30%. *This is not investment advice. Continue Reading: The Hidden Danger in the Cryptocurrency World: Could This be the Second Terra (LUNA) Incident?