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Falcon USD: Liquidity and Collateral Quality Become Concerns

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by Giorgi Kostiuk

5 hours ago


Falcon USD (USDF), a synthetic stablecoin issued by the Falcon Finance protocol, is facing challenges in maintaining its dollar peg amid rising concerns about liquidity and collateral quality.

Falcon USD Price Drop

On Tuesday, Falcon USD fell to a low of $0.9783, triggering a fresh wave of discussions within the DeFi community. Data analysis from CoinMarketCap indicates that the price drop has raised concerns, with some experts questioning the token’s backing and governance. Alex Obchakovich, founder of Obchakevich Research, expressed his concerns about the situation, pointing to collateral quality issues as undermining investor confidence.

Falcon Finance Responds

Andrei Grachev, managing partner at both Falcon Finance and DWF Labs, released a response to the accusations, clarifying that 89% of the collateral comprises stablecoins and Bitcoin, with only roughly 11% being altcoins. Grachev added that USDF is overcollateralized at 116%. He also noted that the peg is maintained organically by traders who can mint and redeem tokens depending on the market price.

Community Questions Company Claims

Alex Obchakovich noted that Grachev's statement raises many questions, particularly regarding claims that alternatives to Falcon Finance are 'overly optimistic'. Meanwhile, pseudonymous developer 0xlaw accused Falcon Finance of holding 'tens of millions of dollars in bad debt' and labeled USDF a 'scam'. An analysis from LlamaRisk also flagged additional risks, including a lack of full reserve asset breakdowns and inaccessible insurance fund.

The situation with Falcon USD underscores the importance of transparency and reliability of stablecoins in an increasingly competitive market. Ensuring investor trust is a key element for the future success of DeFi protocols.

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