Trader Takes Advantage of TrustToken’s TrueUSD Suspension to Establish Short Position

Trader Takes Advantage of TrustToken’s TrueUSD Suspension to Establish Short Position

TrustToken temporarily suspended mints and redemptions of its TrueUSD (TUSD) stablecoin through its banking partner, Prime Trust, earlier this month. This was due to Prime Trust’s cease-and-desist order from the Financial Institutions Division of the Nevada Department of Business and Industry. However, TrustToken clarified that this does not affect its operations concerning the conversion of fiat to stablecoin and vice versa.

Trader’s On-Chain Short Position

An Ethereum user recently utilized Aave’s v2 lending platform to deposit 7.5 million USD Coin (USDC) as collateral. They then borrowed 4 million TUSD and promptly sold it for USDC. This strategy of borrowing and immediately selling is frequently employed to establish a short position on a particular asset.

BitGo’s Failed Acquisition of Prime Trust

Wallet infrastructure provider and digital asset custodian BitGo previously signed a non-binding letter of intent to acquire Prime Trust, according to an announcement on June 8. However, on June 22, BitGo announced on Twitter that it had decided to cancel the acquisition.

Binance’s Replacement of BUSD with TUSD

Following legal action by the New York Department of Financial Services and the U.S. Securities and Exchange Commission against the Binance-branded Binance USD (BUSD) stablecoin and its issuer, Paxos Trust, Binance replaced its BUSD holdings with TUSD. This led to a significant increase in TUSD’s usage and popularity. TUSD is currently the fifth-largest stablecoin after Tether (USDT), USDC, Dai (DAI), and BUSD, with a market capitalization of just over $3.1 billion, according to CoinGecko.

In light of the temporary suspension of TrustToken’s TUSD mints and redemptions, a trader has taken advantage of the situation to establish a short position on the stablecoin. By borrowing TUSD and selling it for USDC, the trader has utilized a common strategy to establish a short position on a particular asset. However, TrustToken has clarified that the suspension does not affect its operations concerning the conversion of fiat to stablecoin and vice versa.

The failed acquisition of Prime Trust by BitGo has added to the uncertainty surrounding the situation. Meanwhile, Binance’s replacement of BUSD with TUSD has led to an increase in TUSD’s usage and popularity. Currently the fifth-largest stablecoin, TUSD has a market capitalization of just over $3.1 billion.

Ethereum

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