Aave founder Stani Kulechov has brushed off concerns about the instability of the stablecoin GHO.
Keeping stablecoins stable has been one of the biggest challenges for the issuers. However, is Aave’s founder trying to normalize stablecoin depegging?
Why Maintaining GHO Peg Is Not Primary Focus
As of writing, Aave’s stablecoin GHO is trading at $0.9659, more than 3% down from its $1 peg. The chart below shows that the price of the GHO stablecoin has been quite volatile, failing in its task of remaining stable.
Regarding the depeg, Aave founder Stani Kulechov wrote on X (Twitter), “I would say the focus on peg should come later.” He says it is a strategic choice because the governance wants to focus on growing the debt nominated in GHO.
Kulechov elaborated:
“I found its quite a lot about the balance between peg and growth in the early stage ofc when GHO is as a collateral, things bet more balanced and of course you can do other cool things for holding GHO specifically, but it’s too early for that”
The community anticipates that the GHO stability mechanism (GSO) could not restore the peg. An X (Twitter) user wrote:
“Only way to get to peg is to increase borrow rate (decrease supply) or to spend/bribe on liquidity farming (increase demand).”
Depeg Problem Across Stablecoins
The GHO stablecoin is roughly a month old at the time of publication. It went live on the Ethereum mainnet on July 16. However, during this shorter time period, it has witnessed frequent depegs.
Notably, the price of GHO sharply dipped on July 31 due to a reentrancy attack on Curve Finance.
Click here to learn more about stablecoins.
Stablecoins with smaller market capitalization are frequently exposed to depegs. In February, Platypus’ stablecoin USP lost its peg by almost 50% as the protocol fell victim to a flash loan attack.
Recently on Monday, Zunami Protocol’s stablecoin UZD depegged to zero as the hackers stole $2.1 million from the project through a price manipulation attack.
Got something to say about GHO stablecoin or anything else? Write to us or join the discussion on our Telegram channel. You can also catch us on TikTok, Facebook, or X (Twitter).
For BeInCrypto’s latest Bitcoin (BTC) analysis, click here.
Trusted
Disclaimer
In adherence to the Trust Project guidelines, BeInCrypto is committed to unbiased, transparent reporting. This news article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content. Please note that our Terms and Conditions, Privacy Policy, and Disclaimers have been updated.
