The new decentralized finance (defi) stablecoin project called Fei had some issues this week after the 1:1 USD pegged token dropped well below its targeted $1 value. The Fei project was supposed to be similar to Maker DAO’s algorithmic DAI stablecoin and it was backed by major venture capital firms.
Fei Protocol Market Price Drops to $0.73 and the Stablecoin Fei’s Bid Slides to $0.136
On social media and forums, crypto advocates have been discussing the defi project called Fei after it lost its peg with the U.S. dollar this week. Currently, a single fei (FEI) is exchanging hands for $0.76 per unit but the price sunk lower than current exchange rates. Coingecko data shows a single FEI dropped to a market price low of $0.73 per token on April 7, 2021.
— banteg (@bantg) April 7, 2021
However, the Fei protocol’s bid hit $0.136 and crypto supporters started talking about the situation. Avalanche executive Emin Gün Sirer noticed the coin lost considerable value and spoke about the concept a great deal.
“FEI dropped down to $0.136. In the process, it should have taught everyone a few lessons about stablecoin design and, perhaps, crypto investing,” Emin Gün Sirer tweeted. FEI/TRIBE was a two-coin algorithmic stablecoin, with a twist. The twist was flawed from the start and it should have been possible to predict that this idea would not work,” he added.
The Avalanche founder and CEO continued:
In a typical two-coin algorithmic stablecoin, you have one coin, FEI, trying to maintain the peg, while the other one is used [to] absorb the volatility. Algorithmic stablecoins work very well when the demand for the coin is so high to be over the peg: you just mint more FEI to bring the price down to the peg. The actual challenge lies in what to do when demand is lagging and price is…