It was a rollercoaster of a weekend for the cryptocurrency world as the value of USDC plunged to as low as $0.878 per token. Panic set in as investors grew increasingly concerned about the collateralization of USDC by banks, especially with rumors swirling about the possible collapse of Silicon Valley Bank (SVB).
But hope emerged as quickly as fear had set in. A joint statement by the Department of the Treasury, Federal Reserve, and FDIC was released, assuring depositors in SVB and Signature Bank that they would not lose their money. And with that, USDC slowly returned to its peg.
Throughout this wild ride, Toros products remained steadfast and operational. In this post, we will delve into how each product was affected by the volatile price swings of USDC.
Leverage BULL/BEAR Tokens
The volatility in the price of USDC had a varied impact on the different Toros products. Among them, the leverage tokens were affected the most because of their leveraged nature, which amplifies the influence of USDC.
For the Bull tokens, the decline in USDC's value artificially boosted the performance of each Bull token, as the pools use USDC as debt. Conversely, for the Bear tokens, the decline in USDC's value artificially reduced the performance of each Bear token, as these tokens use USDC as collateral.
However, it's worth noting that the leverage products do not assume that USDC will remain at $1. Instead, they look at the Aave health factor and target constant leverage. No tokens were liquidated, and all tokens are currently within the target range.
Due to the de-leveraging of Bear tokens on the way down to maintain constant leverage, they may not recover to their previous levels before the de-peg, despite the return of USDC to parity with $1. This is because of the volatility decay effect described in the product's "About" section.
Each yield token has a different stablecoin exposure, and the recent volatility in USDC had varied effects on these tokens.
Stablecoin Yield on Optimism has 50% of the vault in USDC. The majority of the vault is in USDC/sUSD, and some MAI exposure in the USDC/MAI pool. Now that USDC is returning to peg, the value of USDy is increasing to higher highs. The yields have increased due to reduced liquidity.
USD Delta Neutral Yield on Optimism, the stablecoin exposure is all USDC. USDC is used for collateral, while debt on Aave is in volatile assets managed to be delta-neutral. Now as USDC is returning to parity with $1, USDmny is returning to prior levels.
For Risk-Managed Yield, all stablecoin exposure is USDC. RMy also has exposure to the OP/WETH ratio. The performance has since returned to previous levels.
Stablecoin Yield on Polygon is in a Balancer stable pool containing USDC, USDT, MAI, and DAI. While this means USDC exposure would normally be 25% of the LP, currently this LP contains USDC as ~30% of the pool.
Trading volume spiked these past few days, increasing fees collected by this vault. As USDC is now trading closer to $1, dUSD is back above prior levels from the fees collected during this volatility.
USD Delta Neutral Yield on Polygon, has a similar exposure to USDC as USDmny(OP) and is currently returning to prior levels.
dHEDGE contracts use Chainlink oracles for the USDC price on both Optimism and Polygon which have tracked USDC’s price as it fell below $1. Oracle based attacks were avoided and the underlying dHEDGE protocol continued operating as expected.
Synthetix Debt Hedge has exposure to USDy and USDC for the stablecoin position and has since recovered.
Ethereum Managed Liquidity has exposure inside of a WETH/USDC Uniswap V3 LP.
In conclusion, the recent volatility in USDC had varying effects on Toros products, but all remained operational during the event.
The team at Toros Finance is committed to building products that can function even at the highest levels of volatility, with confidence and vigor.
Despite the challenges faced during this period, Toros will continue to innovate and provide the best possible products for its users.
As USDC returns to its peg, we look forward to continuing to serve our users with the same level of dedication and commitment.
Thank you for your support, and happy trading.
About Toros Finance
Toros Finance is a dHEDGE incubated protocol integrating Aave, 1inch, Uniswap, Velodrome, Kwenta and Lyra. Toros Finance aims to simplify access to complex automated strategies, safely, to maximize your returns.
Toros is currently deployed on Polygon and Optimism.