In a significant blow to the cryptocurrency world, Stream Finance has announced a staggering $93 million loss caused by actions taken by an external fund manager. This financial setback has forced the platform to suspend all deposits and withdrawals, leaving users and investors in a state of uncertainty.
Key Details on the Incident
The company’s troubles began when its stablecoin, XUSD, depegged by 23%. It is now trading at $0.938, significantly below its intended $1 benchmark. This development raises pressing concerns about the stability and reliability of algorithmic stablecoins, particularly in volatile market conditions.
In response to the crisis, Stream Finance has hired attorneys from Perkins Coie LLP to conduct a thorough investigation into the external fund manager’s actions. The company has also started withdrawing liquid assets and has promised to keep its stakeholders updated with regular progress reports.
Challenges with Stablecoins
This incident once again spotlights the challenges faced by stablecoins, especially those relying on algorithms for pegging their value. Unlike fiat-backed stablecoins, which have physical reserves, algorithmic stablecoins often rely on mathematical formulas and other cryptocurrencies, making them vulnerable in turbulent markets.
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As the investigation into Stream Finance’s loss proceeds, the incident serves as a stark reminder for cryptocurrency investors to exercise caution and perform thorough research before making financial decisions. The volatility of the market emphasizes the need for strong risk management practices and awareness of potential vulnerabilities.
