Billionaire Mark Cuban, in an interview with Bloomberg, called for the introduction of regulation of stablecoins and DeFi after the collapse of Titan token, the price of which dropped from $ 60 to $ 0 in a day. The owner of the NBA basketball club “Dallas Mavericks” accused himself of laziness, and also admitted that he didn’t research the market before investing in the Titan token. According to Cuban, there should be clearer regulation of the issue of stable blocks and the rules for ensuring its liquidity.
His fears are understandable, but Cuban, being an investor, had to understand that one should carefully approach the choice of cryptocurrency assets for investments.
As for the stablecoins themselves, they are now under the scrutiny of the legislature, and they are considering ways to regulate them. As you know, at the end of 2020, a bill was presented, which requires that issuers of stablecoins receive a card from a banking institution and do not violate the regulations of the banking system.
In turn, the head of the FRS J. Powell pointed out that the number of stablecoins is growing, then you will have to pay close attention to this issue, develop legal norms to regulate them.
Depreciation of the Titan token
On June 17, Cuban announced on Twitter that he suffered from the depreciation of the Titan token. As he was one of the providers of altcoin liquidity.
Cuban wrote about the Titan token on his blog on June 13th. The billionaire revealed that he is providing liquidity for the QuickSwap decentralized exchange. Cuban warned that he could withdraw his funds at any time. And noted the high risks of this way of earning.
Titan is the token of the Iron Finance project. It was used to provide value for the IRON stablecoin. Users could deposit 25% in Titan and 75% in USDC to issue new IRONs. Thus, when new IRONs are minted, the demand for TITAN increases with its price. When the price of TITAN falls sharply, IRON becomes unstable. This is exactly what happened on the night of June 16-17.
When large holders started selling assets, they flooded the market with surplus tokens. As the protocol minted TITAN and siphoned liquidity in an attempt to stabilize IRON, there was an opportunity for arbitrage. This, in turn, brought even more tokens to the market and led to the opposite effect.
That is, when the whales began to cash out profits, the price of the stablecoin began to fall sharply. Panic began, investors began to cash out profits, and the value of TITAN collapsed to almost zero.
Now the project offers to return to users the remaining collateral in USDC stablecoins. However, to do this, you must wait 12 hours until the temporary blockage has passed.
Experts say the crash was not related to hacks or vulnerabilities. In their opinion, this was due to the tokenomics of the project.
Investors should be more careful when choosing assets
This behavior, as is now at Mark Cuban, is quite typical for investors. First, they invest in projects, advertise them, and when problems begin, they advocate increased regulation. It’s good that he admits his mistake and calls for attention to the problem. In what form the regulation of stablecoins will be carried out and when the regulations will be introduced, it is still unknown. Until then, investors should be advised to be more careful when choosing assets.