Trader Seizes Opportunity with $4M Short Position on TrueUSD Amid Issuer’s Suspension of Mints and Redemptions

Asian Trade TVJune 26, 2023

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A trader has capitalized on TrustToken’s recent decision to temporarily suspend mints and redemptions of its TrueUSD (TUSD) stablecoin. Taking advantage of this situation, the trader initiated an on-chain short position.

By leveraging Aave’s v2 lending platform, an Ethereum user deposited a substantial sum of 7.5 million USD Coin (USDC) as collateral. With this in place, they borrowed 4 million TUSD and promptly sold it for USDC. This borrowing-and-selling strategy is commonly employed to establish a short position on a specific asset.

TrustToken’s TrueUSD team had recently announced the suspension of new TUSD minting through their custodial partner, Prime Trust, a company based in Las Vegas, Nevada. Following this, the Financial Institutions Division of the Nevada Department of Business and Industry issued a cease-and-desist order against Prime Trust.

In response to the Prime Trust situation, the TrueUSD issuer made it clear that this development does not impact their operations regarding the conversion of fiat to stablecoin and vice versa. Through a statement, they affirmed their lack of exposure to Prime Trust and emphasized that they maintain multiple United States dollar rails for the minting and redemption of TrueUSD, as stated in a tweet.

Previously, BitGo, a wallet infrastructure provider and digital asset custodian, had expressed intent to acquire Prime Trust in a non-binding letter of intent, as announced on June 8. However, on June 22, BitGo took to Twitter to announce the cancellation of its acquisition of Prime Trust.

Meanwhile, due to legal actions taken by the New York Department of Financial Services and the U.S. Securities and Exchange Commission against Paxos Trust, the issuer of the Binance-branded Binance USD (BUSD) stablecoin, Binance opted to replace its BUSD holdings with TUSD. This move led to a significant surge in the usage and popularity of TrueUSD.

As of now, TUSD ranks as the fifth-largest stablecoin, following Tether (USDT), USDC, Dai (DAI), and BUSD, with a market capitalization slightly exceeding $3.1 billion, according to CoinGecko.