WAVES, the native token on the blockchain of the same name, rose 84% in the past seven days. But the move raised many eyebrows as the token rose as most other cryptos consolidated recent gains.

While early speculation suggested that the token, which hit an all-time high on Thursday, may have benefited from optimism about Waves Labs launching in the US, discourse on Twitter suggests the truth may be a lot darker.

Users have labeled the project as a ponzi scheme, stating that it made its recent gains by borrowing the USDC stablecoin to buy its own token and artificially inflate the price of WAVES.

The plea for the untenability of WAVES

Twitter analyst @0xHamz claimed in a series of tweets that the project was burning WAVES to mint the blockchain’s native stablecoin, Neutrino USD (USDN). It then deposited the USDN on Vires, the blockchain’s original DeFi lending platform, and borrowed USDC from the platform.

This USDC was used to buy more WAVES tokens through Binance, which were again funneled into Vires. Evidence of this was available at chain data

oxHamz drew attention to the fact that USDN had hit at a record pace in the past month, nearly doubling from $475 million to $875 million. USDC lending rates on the platform have also increased significantly during that period.

WAVES is said to incentivize USDC deposits on its platform by offering competitive rates, which are currently around 30%. But these will decrease as more USDC is deposited into Vires, as paying interest rates on a large number of depositors becomes unsustainable.

WAVES price growth is limited by the amount of USDN that can be minted. Once the USDN hits its limit, the token will fall, eventually causing USDN to lose its 1:1 peg against the dollar.

The main victims in this scenario would be the USDC depositors on Vires as there would be no more liquidity to allow them to withdraw their funds. oxHamz also noted that WAVES’s recent price pumps occurred at very specific time periods, further indicating that they were likely artificial.

This high volume/price action lures day traders into momentum longs with tight stops

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WAVES Founder Rejects Accusations

The founder of the project, Sasha Ivanov disapproved the allegations, stating that WAVES’ recent growth has been largely organic. He cited similar stable coin lending models, followed by other DeFi platforms.

Comparisons were also made between the protocol and Terra as they both work on similar mechanisms i.e. LUNA can be burned to coin TerraUSD. But Terra has actively lowered its lending rates to ensure sustainability, as evidenced by a recent vote on Anchor Protocol, Terra’s DeFi platform.

Terra also has huge Bitcoin and stablecoin reserves to back its stablecoin, something WAVES, a relatively small platform, cannot confirm.

Disclaimer

The content presented may contain the personal opinion of the author and is subject to market conditions. Do your market research before investing in cryptocurrencies. The author or the publication is not responsible for your personal financial loss.

About the author

With over five years of experience in global financial markets, Ambar plans to leverage this knowledge for the fast-growing world of crypto and DeFi. His main interest lies in finding out how geopolitical developments could affect crypto markets and what that could mean for your bitcoin holdings. When he’s not scouring the internet for the latest news, you can play him video games or watch Seinfeld reruns. You can reach him at [email protected]





This post Is WAVES’ latest rally unsustainable? Crypto Twitter weighs in

was published first on https://coingape.com/waves-token-nearly-doubles-in-value-this-week-here/

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