July 24, 2021

Fei Protocol genesis locks up $1 billion in ETH, but LPs could face losses

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The launch of Ethereum-backed stablecoin called Fei has locked up almost a billion dollars’ worth of ETH during its genesis event. But the launch hasn’t gone entirely as planned for some of its liquidity providers.

The protocol, which launched a genesis event on April 1, introduced a stablecoin that is partially backed by Ethereum and uses bonding curves coupled with direct incentives to maintain the correct peg. These direct incentives penalize price fluctuations moving away from the peg and reward trades that drive prices towards the peg.

Messari researcher Ryan Watkins observed the genesis event, which included an airdrop to liquidity providers. Over $1 billion dollars in Ethereum was locked up due to these protocol mechanics.

Over $1 billion in ETH temporarily trapped unless FEI holders want to incur penalties.

If you’re holding FEI, you’ll be alright If you’re patient.

But Solvency ≠ Liquidity https://t.co/xoae1sTE5f

— Ryan Watkins (@RyanWatkins_) April 3, 2021

Watkins noted that most early investors will want to liquidate to get their ETH back and make a profit, stating: “The issue with FEI right now is most people want to sell it back for ETH, butTitle: Fei Protocol genesis locks up $1 billion in ETH, but LPs could face losses
Sourced From: cointelegraph.com/news/fei-protocol-genesis-locks-up-1-billion-in-eth-but-lps-could-face-losses
Published Date: Mon, 05 Apr 2021 06:52:28 +0100