Solstice Assures Holders $USX Remains Fully Backed as Stablecoin De-Pegs on Secondary

Solstice’s stablecoin, $USX, found itself the victim of a brief depegging incident, sending ripples of fear throughout Solana DeFi.

While stablecoin unwinds are among the most devastating black swan events possible, Solstice acted quickly to protect the peg, and has assured all holders that $USX reserves remain overcollateralized and redeemable for USD at a 1:1 ratio.

The $USX depeg comes after what is arguably a disappointing week for Solstice, which struggled to sell tokens in its Legion-hosted ICO.

$USX Drops to $0.78 in Brief Depeg

In the early hours of December 26, around 01:45 UTC when much of the world was preoccupied with festivities, excessive sell pressure in secondary markets caused $USX to wick as low as $0.78. 

After ~3 hours of onchain chaos and uncertainty, Solstice team members began injecting liquidity into $USX pairs around 04:30 UTC to return the stablecoin to its USD peg. 

Throughout the depeg, Solstice co-founder and CEO assured $USX holders that the stablecoin remained fully overcollateralized and redeemable. The firm has since released a third-party attestation of reserves from Accountable to transparently demonstrate solvency.

While obviously relieved that the damage was swiftly mitigated and $USX’s peg restored, Solana DeFi users have requested more active management and deeper liquidity provisions to prevent future incidents.

One of the bigger points of contention around the depeg is the fact that many holders and users were unaware of which entities had the right to redeem $USX for fiat currency. In a recent post-mortem released by Solstice, the team reiterated that redemptions are a permissioned activity, available only to institutional partners that have completed KYC.

At press time, $USX currently trades at $0.9987.

Solstice TVL Relatively Unchanged

Despite the $USX depeg causing many Solana DeFi constituents to express concerns about the protocol, Solstice’s TVL has been largely unaffected. 

After soaring to over $300M in a matter of months, Solstice TVL has only dropped around 2.15% since $USX price depegged.

This suggests that Solstice’s handling of the depeg and prompt issuance of an attestation of reserves is giving users confidence in the protocol’s solvency. However, one could also argue that the muted withdrawal of funds is simply that depositors may not have had time to digest the news and remove funds from Solstice.

Solstice ICO Collects 15% of Target Raise

The $USX depeg comes following a disappointing ICO for the Solstice team. Hosted on the Legion ICO platform, the $SLX token sale saw the protocol collect $633k, or just 15.85% of the target raise.

Market participants have blamed the ICO’s underwhelming performance on poor timing. With the sale running parallel to Christmas week, DeFi users argue that potential investors are taking time away from speculative activities.

Solstice has yet to announce further details on the outcome of the sale and the protocol’s path forward.

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