Roller coaster is a term often used in cryptocurrencies. It is certainly the first vocabulary that comes to mind when looking at the Waves chart. The coin gained 240% in March 2022, but has given back all those gains and more, and is now trading 70% below where it opened on New Year’s Day. It currently ranks 81st on CoinMarketCap. In 2017, it was in the top 20, before competitors like Solana, Matic and Polkadot burst onto the scene. So what’s going on here?
Table of Contents
First, what is Waves?
An all-in-one blockchain capable of supporting multiple decentralized applications and smart contracts, Waves’ summary is truly an alternative to Ethereum. Most popularly, it grants users the ability to easily create and trade custom cryptocurrency tokens. Extensive smart contracts are not required, instead the coins can be executed via user account scripts built on the Waves blockchain.
Why the share price madness?
The chart below, tracing the market cap of WAVES since the beginning of the year, only requires a glance to realize just how unusual the price action here has been. The March boom was caused by a few variables. Anticipation on the Waves 2.0 update. The announcement of a $150 million fund to boost applications and protocols running on its blockchain. Additionally, the tweet below reaffirming Waves founder Sasha Ivanov as a Ukrainian seemed to also provide some impetus.
I am from Zaporozhye, Ukraine. pic.twitter.com/NwsYRztjr0
— Sasha Ivanov 🌊 (1 ➝ 2) (@sasha35625) February 27, 2022
But why the impressive drop since then, 93% below the peak? Most concerning was the analysis circulating on Twitter that the team was involved in manipulating the price of its native token through its own DeFi loan protocol Vires.finance. It is important to note that Ivanov dismissed this as false, instead blaming Alameda for manipulating the price and at the same time launching a hostile media campaign to induce panic selling in the markets.
WAVES is the biggest ponzi in crypto It has recklessly engineered price spikes by borrowing USDC at 35% to buy its own token Continuous WAVES market cap growth is needed to keep the system stable WAVES will eventually crash and USDN will break with it You’re on notice🧵 — 0xHamZ (@0xHamz) March 31, 2022
Get your popcorn ready: @AlamedaResearch manipulates $waves price and organizes FUD campaigns to trigger panic selling. I hope I caught your attention. Follow me. — Sasha Ivanov 🌊 (1 ➝ 2) (@sasha35625) April 3, 2022
USDN unlinking
Either way, the debate quelled enthusiasm for the token, which was reflected in the price. This all got worse when, and stop me if this sounds familiar, a stablecoin started being unlinked. USDN is the currency in question and it works similarly to Waves as UST did to Luna. Ivanov’s measures to fight an untying event were controversial – lowering settlement limits, limiting borrowing and instilling maximum APRs. Amid the furor, the Waves token continued to fall, however, while liquidity in the Vires.finance protocol followed suit.
USDN is currently depegging and waves founder Sasha Ivanov is desperately trying to manipulate the price back up by blocking borrows on https://t.co/6oqUv09F2h (aave for waves). Here’s why I have a short position on $Waves. 🧵 (Obligatory not financial advice dyor) — irfan (@irfshaik7) April 4, 2022
Now, the team has released a proposal to revamp the approach and regain faith in USDN after untying, to as low as 75 cents last month, and still trading below 97 cents at the time of writing.
Renovation
USDN is currently supported by approximately 40 million WAVES leased to two generator nodes. Half of the profit generated by leasing WAVES is sent as a reward to USDN participants and the other 50% is sent to the smart contract to increase USDN reserves. The team is striving to decentralize and solidify the parity control mechanism, and therefore seeking out cryptocurrency investors and community members “who are willing to run their own nodes for Neutrino’s needs to improve system reliability and make their own interest”. The addition of participants will be gradual and one by one. The maximum number of participants cannot exceed 80. For starters, each participating node will be leased 1 million WAVES, this amount may change in the future with the possibility of additional participants. Participants will be grouped into groups of 10 addresses to simplify the management of leased values. The second phase of the program will give the community the chance to govern decentralization through voting.
Conclusion
It remains to be seen whether this will restore trust among the community after the untying. The collapse of the stablecoin UST obviously sent shockwaves across the space, but with USDN holding so many parallels, the pain was more pronounced here than elsewhere. On the positive side, the Waves team recognized that action was needed and is now taking action. If they learn from Terra’s mistakes and make the necessary adjustments, there can be a recovery. If not, all bets are off. It will be interesting to follow.
