It is an algorithmic stablecoin, which increases fear in the markets.
The Cardano community appreciates the rapid price recovery it has.
The DJED token, an algorithmic stablecoin of the Cardano network, registered a significant drop in its price on Friday, reaching $0.55.
The graph below shows that, after maintaining stability near $0.99 during the previous days, DJED stablecoin price fell sharply up to USD 0.55 on October 10, before recovering its initial value in a few hours.
The behavior generated debate in the community. The algorithmic nature of DJED means that its stability depends on smart contracts and reserves of ADA, Cardano’s native cryptocurrency, which increases the perception of risk in the event of sudden market movements. All this, when remembering the events of Luna and Terra, where the collapse of an algorithmic stablecoin unleashed a generalized bear market.
However, project advocates say the system responded as expected. Charles Hoskinson, founder of Cardano, he emphasized that, during the crash on Friday, October 10, when ADA temporarily lost more than 60% of its value; “DJED maintained its parity.”
In Hoskinson’s opinion, although the graphs reflected a clear decoupling, “maintaining a fixed exchange rate does not mean being at an exact dollar 24 hours a day, but rather quickly recovering parity after a shock.”
Philip DiSarro, CEO of Anastasia Labs, explained for his part that “DJED never fell to $0.55”, but, in his opinion, that was the price in secondary markets.
“At all times, users were able to redeem DJED between $0.98 and $1.02 within the protocol,” he said, later adding that External variations do not affect the value guaranteed by the contract.
However, it must be remembered that, in the markets, Asset prices are determined by bidders and demanders. This means that, even though they were in secondary markets, there was indeed a decoupling of the Cardano stablecoin, just as there was, for example, in the Ethena stablecoin, as reported by CriptoNoticias.