TrueUSD Bears Feel Strong with $4M Short Trade after Minting and Redemption Suspension

TrueUSD, the stablecoin, faces mounting bearish sentiments as a trader enters a substantial $4 million short position in response to suspending minting and redemptions.

TrueUSD’s value is declining due to investor pessimism. The halt in minting and redemptions has amplified concerns about TrueUSD’s stability, strengthening the bearish sentiment.

Ethereum User Borrows 4 Million TrueUSD in Short-Selling Move on Aave

Ethereum users use Aave’s v2 lending platform to borrow 7.5 million USDC. Due to TrustToken’s temporary suspension of TrueUSD (TUSD) minting and redemptions, a trader saw an opportunity and shorted the token.

Basically, they’re betting the TrueUSD value will drop during this time.

Data from the Ethereum blockchain shows a user of the Aave v2 lending platform deposited 7.5 million USD Coin (USDC) as collateral.

The user then borrowed the equivalent of 8.4 million TrueUSD (TUSD) from the lending platform. This suggests that the user expects the value of TUSD to drop relative to USDC so that they can pay back the loan with cheaper TUSD.

In exchange for USDC, they borrowed 4 million TrueUSD (TUSD). Short selling involves borrowing an asset and selling it immediately to profit from a decline in value.

The TrueUSD team announced earlier this month that they’d stop creating new TrueUSD (TUSD) coins through Prime Trust. As a result, Prime Trust, a Las Vegas company, received a cease-and-desist order from the Nevada Department of Business and Industry.

TrueUSD’s issuer reassured users that Prime Trust’s situation does not affect their ability to convert regular money into TrueUSD.

As they said in a tweet, they are not connected to Prime Trust and have alternative ways to mint and redeem TrueUSD using different U.S. dollar systems.

TrueUSD Emerges as the Fifth-Largest Stablecoin with Growing Market Cap

Prime Trust was previously interested in being acquired by BitGo, a provider of wallet infrastructure and custodian services. In a tweet on June 22, BitGo announced they were canceling the Prime Trust deal.

In the wake of legal action by the New York Department of Financial Services and the U.S. Securities and Exchange Commission, Binance has been under scrutiny.

This is because Binance has been alleged to be operating without proper licensing, thus violating the financial regulations of the United States.

The company has been accused of failing to prevent suspicious activities and not having proper anti-money laundering protocols. Binance has denied any wrongdoing and is working on addressing the accusations.

Binance and Paxos Trust switched from BUSD to TUSD to replace their BUSD holdings. TUSD stablecoin usage and popularity skyrocketed after this move.

As per CoinGecko, TUSD is the fifth-largest stablecoin behind Tether USDT $1.00, USDC, Dai DAI $1.00, and BUSD. The company has a market cap of about $3.1 billion.

A stablecoin backed by the US dollar, TUSD is popular. Cryptocurrency exchanges use it for trading and other stuff. Compared to other stablecoins, TUSD is more secure and transparent.

This is because TUSD is fully collateralized, meaning each coin is backed 1:1 with US dollar reserves held in a bank account.

Also, an independent third-party auditor regularly assesses the reserve balance to ensure compliance, making it more secure and transparent than other stablecoins.