May 23, 2022
Sperax USD Primed to Capture Sizable Share of Stablecoin Market Cap
The crypto community has seen and survived a number of existential threats to the system since Bitcoin’s inception in 2009. The Mt. Gox hack tested the trust of centralized actors in crypto, and the 2017 market crash proved that crypto assets remained volatile, especially after all-time highs.
Crypto faced another epiphany this month, as algorithmic stablecoin provider Terraform Labs reminded the community of these same vulnerabilities: centralization and volatility. The $UST house of cards crumbled under rapid value decrease in the collateral token, LUNA, whose price stability was vital to maintaining the $UST peg.
While setbacks are a given as visionary builders create a digital economy on the blockchain, the response by professionals and communities to these setbacks ultimately pave the path for long-term success and sustainability.
One of the biggest changes to crypto after the market crash in 2017 was the rise of stablecoins as a way to escape volatility while keeping capital within the crypto ecosystem. From the ashes rise new giants.
So how does Sperax see itself primed for success in light of the recent depeg of the world’s (once) most valuable algorithmic stablecoin?
People still have a need for trusted stablecoins
$UST had locked up more than $18B of users capital.
Yet the bulk of that value has been lost and is now looking for a new home. While the drop in $UST market cap clearly resulted from the depeg, most stablecoins across the spectrum took a hit in market cap as users felt some unease and yanked their assets.
In fact, this is a boon to Sperax USD as a young, healthy stablecoin protocol. With billions of dollars searching for a new stablecoin home, where will all the value flow now that $UST is no longer a viable pegged asset?
On further look, the data shows that in the immediate aftermath of last week, USDC already captured some value as they gained in pure market cap. What’s the difference between USDC and the rest of the field?
They’re backed.
Sperax uses market lessons to adapt for the future
In light of algorithmic vulnerabilities, Sperax USD has become 100% collateralized at this time. In the current market, the community unequivocally believes that backed is better.
The protocol currently holds USDC and USDT at a 100% collateralization ratio.
Yet the opportunity to employ the algorithmic component of $USDs in the future puts Sperax in a unique position compared to the rest of the stablecoin field. A highly collateralized, tightly bound peg gives $USDs the ability to scale — while also remaining backed by collateral assets deployed to earn Auto-Yield for $USDs holders.
For now, the Sperax team has prioritized the launch of Sperax DAO, to turn over the most important levers in the protocol to community decision. Including more collateral assets, allocating collateral to earn yield for $USDs and $SPA holders, reintroducing algorithmic strategy, and more will be voted on by the DAO.
Why is $USDs the obvious choice in this new stablecoin climate?
When the market need for stablecoins is realized in forthcoming bullish periods, there are only a few viable options to fulfill this demand.
$USDs will check all the boxes:
✅ Backed
✅ Decentralized
✅ Algorithmic levers
✅ Hands-free Auto-Yield
Since decentralized stablecoins will play a significant and growing role in the crypto ecosystem, the stability of $USDs along with its native 11% Auto-Yield positions $USDs to service the market need for decentralized stablecoins.
But didn’t $UST prove that algo stables are dangerous?
Sort of… the $UST depeg proved that the stablecoin collateral needs to be managed by a DAO, with a focus on decentralization and transparency.
The current TVL graphs show that $USDs did not face the same kind of capital outflows percentage-wise when compared to other decentralized stablecoins.
Resilience during stress tests brings confidence in a young protocol like Sperax, and gives the team the opportunity to learn from other market failures.
The Terra Luna strategy was dangerous. Centralized Luna Foundation Guard (LFG) proved a huge liability as a trusted party in the Terra Luna relationship, as the absence of on-chain collateral prevented accountability and transparency in the LFG.
We see a risk spectrum of algorithmic stables: If $UST took up the most risky position on the far left, Sperax has adapted $USDs to the far right of the risk spectrum. We are committed to bringing sustainable solutions to scaling $USDs.
For now, FRAX is the most popular algorithmic stablecoin, with a $1.5B market cap. While FRAX is partially collateralized, reliance on a prioritized algorithmic strategy will deter individuals and institutions looking to move their capital into stablecoins.
Transparency is key in the Sperax ethos. From Day 1 Sperax has maintained on-chain collateral, so that users can validate exogenous collateral held by the protocol. As stated before, this collateral now backs $USDs at 100%.
This leaves $USDs in an excellent position to accrue the capital waiting to re-enter decentralized, transparent stablecoins.
Will Sperax emerge as a world-leading stablecoin?
Since the previous market cap of decentralized stablecoins was just over $20B, with $18B serviced by $UST, future markets will look to fulfill this 90% vacuum in the current market for decentralized stablecoins.
While a crypto winter may not see major inflows to stablecoin markets on the whole, the tides will inevitably shift, and many users will be looking for a decentralized stablecoin home.
With the current market losses showing $18.5B unserviced demand for decentralized stablecoins, we can do some back of the napkin math to show how $USDs would fulfill this market need.
With its current market cap of $16M, if $USDs captures 10% of the $18B previous demand for decentralized stablecoins, the $USDs market cap will explode over 100x.
In a more conservative scenario… If $USDs captures just 1% of the demand for decentralized stablecoins lost in recent weeks, the $USDs market cap will see over 10x increase.
At Sperax, we believe $USDs will be the ideal candidate to capture demand, as it can scale, while being backed 1:1 for peg stability, and earning holders Auto-Yield. With the removal of $UST from Curve, $USDs has a unique opportunity to take the position as the defacto decentralized stablecoin liquidity through strategic liquidity programs on AMMs like Curve and Saddle.
In spite of the recent events surrounding Terra Luna, and tests of the entire stablecoin ecosystem, $USDs has forged a more resilient structure, and has a major opportunity to grow TVL as demand for decentralized stablecoins resumes. The analysis of Sperax USD’s position doesn’t even take into account the main value proposition for $USDs: Auto-Yield. As an industry pioneer in this non-inflationary, yield generating design, $USDs has a bright future.
For the Sperax team, our role in the ecosystem has shifted. The team will not be directing the protocol, instead helping the community understand trade offs when making decisions, before proposals go to vote at the hands of veSPA holders.
About Sperax
Sperax is dedicated to benefiting all financial lives with blockchain technology.
With the Sperax token ($SPA) at its core, Sperax has built the first auto-yield stablecoin, $USDs, and a suite of DeFi apps.
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