Yesterday evening, the price of Iron Bank Euro (ibEUR), a stablecoin, experienced a drastic drop of 60%, plunging it into a decoupling crisis. The approach to returning ibEUR to its peg with the Euro remains unclear, causing concerns about the stability of the stablecoin in the market.
Background:
S&P Ratings Rates Stablecoins for the First Time: USDC Receives a Grade 2, USDT Restricted Due to Transparency Issues
The decoupling risk of stablecoins has attracted high attention in the industry, and the three major credit rating agencies, including Moody’s and S&P, have started researching stablecoins. Moody’s has launched an AI tool specifically targeting the decoupling risk of stablecoins, while S&P has issued its first official rating for stablecoins on the 13th of this month.
According to CoinDesk’s report, Iron Bank Euro (ibEUR), on the evening of the 19th, experienced a severe price drop, with its price falling to around $0.38 at one point, a staggering decrease of 60%. Although the stablecoin has since recovered and is currently priced at around $0.7, it has not shown any signs of being re-pegged to the Euro.
Reason for Decoupling:
The main reason for this decoupling is that a trader withdrew nearly $900,000 of USDC liquidity from the Curve pool, which supports most ibEUR transactions. This led to insufficient USDC liquidity in the pool, causing market imbalance and causing the price of ibEUR to drop from the usual $0.97 to a low of $0.38.
The target price for returning:
Currently, the path for ibEUR stablecoin to return to its peg with the Euro is not clear. The protocol Iron Bank, which supports ibEUR, is currently not actively maintaining its peg and lacks sufficient financial liquidity to stabilize this asset.
At the same time, Funk, the Telegram chat room administrator for Keep3r Network (Fixed Forex), a partner of Iron Bank, mentioned that Keep3r vaults can trade liquid assets at a discounted price in exchange for ibEUR and use it to partially repay Iron Bank’s debt. However, the execution of this action depends on Keep3r’s multi-signature decision.
Another solution is to allow the Curve pool to automatically return to the target price. Currently, the ibEUR liquidity in the pool is slightly higher than USDC, accounting for 51.89% and 48.11% respectively.
Regarding the future prospects, the effectiveness and implementation time of these solutions are still unclear. Therefore, the long-term stability and feasibility of ibEUR stablecoin still remain uncertain.