The synthetic overcollateralized stablecoin Falcon USD (USDf) created by Falcon Finance fell below its intended $1 peg due to concerns over liquidity and collateral quality.
The value of USDf dropped to $0.9783 but has since recovered to $0.9923. The stablecoin is backed by locked digital assets like volatile cryptocurrencies, not fiat deposits.
A post by Andrei Grachev, managing partner of DWF Labs, revealed that USDf is 116% overcollateralized, with 89% collateral in stablecoins and Bitcoin and 11% in altcoins.
Traders help maintain USDf's peg by minting and selling stablecoins when prices exceed $1, and purchasing and redeeming them when prices fall below $1. The stablecoin employs market-neutral strategies for income generation.