Algostablecoins DAI and FRAX Lose Their Peg to USD
Amid the collapse of Silicon Valley Bank, the algorithmic stablecoins DAI and FRAX lost their peg to the US dollar, mirroring similar problems experienced by the stablecoin USD Coin (USDC).
CoinGecko’s stablecoin ranking by capitalization currently ranks DAI fourth and FRAX sixth, with respective capitalizations of $5.1 billion and $946 million. At the time of writing, DAI is trading at $0.92 and FRAX at $0.96.
Data from DaiStats shows that USDC currently accounts for more than 54% of the collateral backing the issued DAI.
The peg for USDC was lost after its issuer, Circle, revealed that it was holding $3.3 billion in reserves at SVB, which was shut down by the California Department of Financial Protection and Innovation due to “lack of liquidity and insolvency.”
In February, the Frax Finance platform community voted to gradually transition from algorithmic support of the FRAX stablecoin to full collateralization.