Usual Money, the protocol behind the stablecoin USD0 and its staking derivative USD0++, triggered a sharp market reaction after modifying the redemption policy for USD0++. The change ended the 1:1 conversion between USD0++ and USD0, leading to an immediate price decline and a significant contraction in overall stablecoin supply.
Policy Modification Details
Previously, users could unstake USD0++ at a guaranteed 1:1 ratio for USD0. The updated mechanism replaced this simple peg with a new pricing formula, details of which have not been fully disclosed. The adjustment effectively removed the arbitrage incentive that kept USD0++ trading near $1.0, as holders could no longer rely on full redemption value. This forced many to sell into the market, amplifying downside pressure.
USD0++ Price Plunge and Supply Contraction
On January 9, USD0++ dropped over 8% to a low of $0.905, according to CoinGecko data. As of January 11, it has partially recovered to $0.939 but remains well below the expected $1 mark. The total supply of USD0, which includes unstaked tokens, contracted by $340 million over four days, declining from a peak of $1.88 billion on January 7 to $1.54 billion. Despite the supply reduction, USD0 itself maintained its $1 peg, indicating the stress primarily affected the staked derivative rather than the base stablecoin.
USUAL Token Declines Sharply
The protocol's governance token, USUAL, experienced even steeper losses. It fell 3.7% in 24 hours and 33.1% over the past week, trading at $0.63 with a market capitalization of $328 million. The simultaneous drop in both USD0++ and USUAL underscores the interdependence between utility tokens and governance assets in DeFi protocols. Market participants likely interpreted the policy change as a negative signal for the project's governance stability.
Context and Implications
USD0 had recently entered the top ten stablecoins by market cap, competing with First Digital's FDUSD. The policy revision, however, has eroded confidence in its derivative ecosystem. Analysts warn that if USD0++ fails to regain a close-to-$1 valuation, liquidity providers may migrate to other yield-bearing alternatives, further pressuring Usual's TVL. The incident serves as a reminder of the delicate balance required in designing redemption mechanisms for synthetic assets. The Usual team has not announced any further changes, but the community is closely watching for potential damage control measures. While USD0 retains its peg, the reduction in total supply suggests some users are exiting the ecosystem altogether. The coming weeks will determine whether this is a temporary setback or a structural shift in the protocol's competitive position.