Fei ProtocolMarkets

Algorithmic Stablecoin Crashes 50% as Devs Scramble for a Fix

The FEI stablecoin experiment has failed to maintain a peg with the USD, as $1.2 billion ETH is stuck in the smart contract.
FEI Stablecoin Failure
Fei protocol investors have arrived at a difficult crossroad. They could either incur penalties to withdraw Ether while FEI is trading less than its $1 peg or wait until FEI reaches parity and risk their entire deposit. As such, users have been looking forward to the protocol’s reweighting mechanism. 
However, the second event at 8: 33 am EST yesterday morning failed to establish the peg. Banteg, a core developer of Yearn Finance, suggested a surrender of ETH locked in the protocol and “get back to the drawing board.” 

Fei went into full capitulation mode after the second reweight. People in discord report the UI doesn’t allow selling when the penalty is over 50% (price is lower than 0.93). A good move would be to return the captive ETH and get back to the drawing board. pic.twitter.com/XblhvpKbZd
— banteg (@bantg) April 6, 2021
FEI is an algorithmic stablecoin that seeks to maintain a $1 valuation without actual fiat (like USDT or USDC) or crypto (like DAI) collateralization. 
The price of the stablecoin is dependent on the Uniswiaps’ liquidity for the FEI/ETH pair. Liquidity providers (LPs) earn rewards for their contributions in maintaining the stablecoin’s liquidity.
Nonetheless, like all economic assets, its price depends on supply and demand. 
The protocol minted a lot of tokens at the genesis block. However, due to low demand, the peg against the dollar failed …
Story continues on Crypto Briefing

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