Falcon USD: The Stablecoin That Couldn’t Stay Stable 😂

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In the vast and often treacherous world of decentralized finance (DeFi), where the line between innovation and folly is as thin as a blockchain, Falcon USD (USDf) has taken a tumble. This synthetic overcollateralized stablecoin, issued by the Falcon Finance protocol, has slipped below its intended $1 peg, a fall that has sent ripples of concern through the crypto community. According to CoinMarketCap, USDf plummeted to a low of $0.9783 on Tuesday morning, a drop that has sparked a flurry of questions and a fair bit of skepticism. 🤔

Alex Obchakevich, the founder of Obchakevich Research, expressed his unease to CryptoMoon, noting that the whispers about the quality of the collateral backing USDf have only added to the growing sense of unease. “I am concerned about the situation,” he said, his words carrying the weight of a man who has seen too many crypto dreams turn to dust. “Rumors of collateral issues have certainly not helped investor confidence.”

Unlike more traditional stablecoins like USDC or USDT, which are backed by actual US dollars sitting in bank accounts, USDf is minted by locking up digital assets, including the ever-volatile cryptocurrencies. This unique approach, while innovative, has its own set of challenges, especially when the market takes a turn for the worse.

Parsec, a blockchain data explorer, reported on X that the onchain liquidity for USDf has seen a significant decline, standing at a mere $5.51 million at the time of writing. “The blockchain data shows a sharp decline in liquidity, which only adds to the panic,” Obchakevich added, his voice tinged with a hint of irony. 📉

Falcon USD issuer responds

Andrei Grachev, the managing partner at both Falcon Finance backer DWF Labs and the stablecoin issuer itself, did not remain silent in the face of these accusations. In a lengthy X post, he defended the stability and transparency of USDf. Grachev claimed that stablecoins and Bitcoin (BTC) make up 89% (about $565 million) of the collateral, with only 11% (about $67.5 million) being altcoins. He also emphasized that USDf is overcollateralized to 116%, a figure that, he hopes, will reassure the skeptical masses.

Grachev further explained that Falcon Finance employs only market-neutral strategies for revenue generation, avoiding any directional trading. “Every minted USDf must be backed by a stable coin or a hedged position that represents dollar value and has no directional risk,” he stated, his words a mix of reassurance and a subtle challenge to his critics. He also noted that the peg is maintained organically by traders, who can mint and sell USDf if its price exceeds $1, or buy and redeem it if it falls below $1.

Despite Grachev’s efforts, DWF Labs had not responded to CryptoMoon’s request for comment by the time of publication, leaving the air thick with unanswered questions and a dash of suspicion. 🤐

Community challenges Falcon’s claims

Obchakevich, however, was not convinced by Grachev’s defense. He told CryptoMoon that the post raises more questions than it answers. For instance, he disputes the claim that there is no alternative to Falcon Finance, calling it “overly optimistic” and a “marketing ploy.” “Competitors such as DAI or USDC have well-established positions with larger reserves and a wider user base,” he pointed out, his words a reminder that in the world of DeFi, reputation and trust are as valuable as any collateral.

Others were even less diplomatic. 0xlaw, a pseudonymous developer who manages the yield farming protocol Stream Finance, accused Falcon Finance of holding “tens of millions of dollars in bad debt” and labeled USDf as “a scam” in a post on X. According to 0xlaw, USDf is allegedly backed by illiquid assets, including large reserves of Movement Network’s MOVE token, which Coinbase suspended from trading in May due to noncompliance with listing standards. 🚨

A separate risk assessment from DeFi research group LlamaRisk, published in late May, added more fuel to the fire. The report highlighted the Falcon team’s unilateral authority over the operational management of the reserve assets and raised concerns about possible over-issuance. “Using DOLO as collateral, up to 50,000,000 USDf can be minted, which exceeds DOLO’s market capitalisation,” the report stated, a fact that has not gone unnoticed by the community.

The report also flagged concerns over missing disclosures, including a lack of full reserve asset breakdowns and an inaccessible insurance fund. In the world of DeFi, where transparency is often as rare as a stable peg, these omissions are not taken lightly. 🕵️‍♂️

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2025-07-08 17:44