This Ethereum-based ‘Non-Volatile’ Stablecoin is on a Roller Coaster Ride
Just last week yet again Dynamic Set Dollar (DSD) 275% only to crash 91% to under $0.3.
The latest stablecoin which is all the rage right now is Dynamic Set Dollar (DSD) which is a sophisticated algorithmic stablecoin.
Launched less than a month back, the price journey of this stablecoin has been extremely volatile. Rising just above $80 on its first day of coming into existence, much like any other DeFi attraction, DSD dropped to $31 the same day.
On Dec. 2nd, a new high at $86.57 was set, as per CoinGecko. From here, it started tanking, going to about $0.66 on Dec. 12.
Last week, the stablecoin, yet again, rallied 275% only to crash 91% to under $0.3.
As of writing, DSD has been trading at $0.36.
The price action of this Ethereum-based stablecoin surely got many people REKT. But it isn’t all over as the circulating supply of DSD will be increasing by about 1/3 today which “could generate heavy selling.”
It was to fulfill DeFi’s needed functionality while “reliably maintaining its peg” that the team launched DSD.
Based on the popular rebasing method, the token supply increases and decreases with every rebase by directly adjusting the number of tokens in every token holder’s wallet.
Whenever DSD trades below the $1 peg, token holders are incentivized to contract the token supply to bring the spot price back to the peg for which Coupons (debt) is issued. Users burn their DSD to purchase Coupons, which have an expiry of 360 epochs and the debt ratio capped at 35%, thereby reducing the supply. When DSD goes above $1, new DSD are minted to push the supply down.
DSD allows for 12 potential supply extension or contraction events per day.
In its official announcement, the team defined DSD as a “non-volatile digital asset pegged to the dollar, so the risk of liquidation through volatile price action is low.”
However, the stablecoin is anything but non-volatile as seen in the price movement and currently gaining a lot of interest.