Iron Finance Suffered DeFi ‘Bank Run’ While Titan Token Collapse

    20 Jun 2021
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    Another decentralized finance (DeFi) protocol suffered a collapse in token value. The IRON Titanium Token, or TITAN, backed by billionaire Mark Cuban fell from over $60 to zero dollars on June 16 morning. Cuban has claimed he ‘got hit like everyone else’ after the token crash.

    The DeFi Titanium token in one day has dropped from around $60 to $0.  Even for the crypto world, where massive drawdowns are usual, such 100% washout is too rare and pretty fast.

    The token was part of the Iron Finance algorithmic stablecoin project, created to follow the stablecoins hype in recent times. Some stablecoins (as USDT or USDC) are linked to the dollar, others (like Dai) are backed by overcollateralized crypto assets. As well there are so-called algorithmic stablecoins, which use a dual-currency structure and attempt to hold a peg by creating arbitrage opportunities between coins.

    So what triggered the collapse? According to Rekt.news, the TITAN coin had become wildly overpriced. Then people start selling it — triggering a high amount of volatility, overwhelming arbitrage opportunities and causing everyone to run to the door.

    And it’s possible that Mark Cuban also had something to do with the huge rally in the token price. As known, Cuban have been involved in TITAN, having mentioned the token on his blog recently. Possibly, that the attention he drew to the project helped cause the massive surge in the price that then triggered the cascade of sales.

    The Iron Finance team claimed that a few big holders started selling, which caused panic as more small investors started to redeem IRON and sell their TITAN.

    “This caused a negative feedback loop, as more TITAN was created (as a result of IRON redemptions) and the price kept going down. A classic definition of an irrational and panicked event also known as a bank run,” the team noted.

    The news was soon being discussed on Twitter. Many users have referred to the TITAN crash as a rug-pull—a type of exit scam whereby cryptocurrency developers abandon a project and leave with investors’ funds. Replying to this, Cuban wrote: “I got hit like everyone else.”

    This collapse exposed a flaw in the token’s design that created an arbitrage opportunity, effectively allowing investors to make unlimited money by buying and selling the token, which drove prices down further.

    “It was a crypto vortex of money,” said Fred Schebesta, an Iron Finance investor and the founder of fintech company Founder. “What happened is just the worst thing that could possibly happen considering their tokenomics.” Reddit users have also blamed dull designs for the falling prices of other hyped tokens (such as Safemoon and Shiba Inu), although their crashes have not been so harsh.

    This crash continues a long line of algorithmic stablecoin projects that have crashed, as nobody seems to have known how to fix it. The repeated failure of such projects became a meme in the crypto community. Reddit users have also blamed dull designs for the falling prices of Safemoon, Shiba Inu, and other hyped tokens, although their crashes have not been so harsh.

    Interesting fact: about one-third of the world’s 100 most valuable cryptocurrencies have plummeted at least 40% over the past month, and a dozen have crashed more than 50%, according to crypto-data site CoinMarketCap. Only three have added value: Quant, Theta Fuel and Amp – small and extremely volatile tokens worth $916 million, $2.8 billion, and $4.2 billion, respectively.

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