DWF Labs Moves to Reassure Market Amid WLFI Collateral Concerns—"No Bad Debt Here"
Market maker DWF Labs steps in to quell fears swirling around WLFI's collateral health—just another day in crypto's trust economy.
When whispers of shaky collateral hit crypto Twitter, panic spreads faster than a memecoin pump. Enter DWF Labs, swinging its market-making bat to calm the herd. "Risk management isn’t dead," their team insists—though skeptics note they’d say that anyway.
Behind the scenes: Liquidity providers demand transparency, while traders side-eye leveraged positions. Same script, different bull run. One thing’s clear: In DeFi, trust is the only collateral that never gets liquidated.
Bonus jab: If ‘bad collateral’ was a tradable asset, Wall Street would’ve securitized it by now.
Founder Andrei Grachev defends DWF Labs collateral
Andrei Grachev, head of DWF Labs and the stablecoin issuer Falcon Stable, set out to dispel claims of shaky collaterals and risks related to the USDf stablecoin.
Grachev announced the project is collateralized by BTC and stablecoins for over $565M, or 89% of the portfolio. The remaining 11% are collateralized by a mix of altcoins and tokens. Overall, the project holds collateral in excess, with a ratio of 116%.
The total supply of USDf is valued at $542.2M, reportedly sufficiently backed by assets. The doubts about USDf were raised as the token once again de-pegged down to $0.99.
Falcon’s USDf accepts TRUMP meme tokens as collateral
USDf has no specific backing, and may be rebalanced with the addition or removal of altcoins. This is precisely what worried social media analysts, as the stablecoin issuer also accepted the highly volatile OFFICIAL TRUMP (TRUMP) as collateral.
Previously, World Liberty Fi also used its holdings of AVAX, MOVE, and SEI to mint USDf. The assets have since increased their volatility, setting up relatively risky collateral. World Liberty Fi minted $2M USDf, a relatively small amount, though still exposing both projects to risk.
USDf is also partially backed by hedged positions. The reported collaterals are also not detailed, leading to allegations of hidden bad debt or collaterals that cannot be easily liquidated to support the stablecoin.
The USDf stablecoin trades mostly on decentralized protocols, relying on CurveFi and Uniswap V3. Falcon Stable has a transparency board, which does not include a detailed breakdown of assets.
It is precisely the mixed bag of crypto collaterals that is worrying, especially after the latest de-peg of USDf. While the stablecoin has a relatively small impact, it can still erase value, while affecting the reputation of World Liberty Fi and DWF Labs.
The usage of TRUMP and risky coins to back the USDf asset also recalls the case of Terra (LUNA), which used its own token to back the issuance of more TerraUSD stablecoins. Usually, stablecoins use ETH or SOL as collateral, with fewer issuers agreeing to high-volatility assets.
Currently, all crypto collaterals are declared together as ‘other’ assets, with no differentiation between BTC and riskier assets, including meme tokens. Falcon holds $25.33M in on-chain reserves, including DeFi protocols and staking.
The rest of the collaterals are held off-chain, using Fireblocks, Ceffu, Binance, and ChainUp as custodians. Additionally, the known wallets of DWF Labs contain $14.4M in mostly altcoins, of which around $5M in ETH.
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