Unsuccessful Attempt by GHO Stablecoin to Attain Dollar Parity Attracts Negative Comments, Bluechip Marks It with a D-
The GHO stablecoin, covered by this blog just a few weeks ago for its significant achievement of reaching a valuation of $0.98, unfortunately failed to sustain its level of success and fell to $0.975 per coin on December 11. Despite showing potential signs of improved stability, GHO continues to fall short of reaching and maintaining the crucial $1 benchmark.
Unsustained Stability of GHO
GHO, which is the product of Avara (previously known as Aave), has emerged as a noteworthy example in the space of dollar-pegged tokens. However, its failure to consistently uphold the $1 peg since its inception in mid-July doesn’t paint a promising picture. Its value dropped to a dismal $0.917 on October 24, 2023, but it managed to recover to a promising $0.98 per coin towards the end of November.
Unfortunately, this stability couldn’t last. On December 11, the value of GHO fell again to $0.975 and despite a brief appreciation to $0.987, it has been unable to break the elusive $1 barrier. Add to the equation an additional 10 million coins launched since October 21, bringing the total coins in circulation to approximately 34.72 million, and GHO’s market capitalization barely surpasses the $34 million mark. Unsurprisingly, these persistent price fluctuations have attracted a great deal of criticism.
Reacting to the situation, Chroma’s Jack Longarzo stated, “Adding more stablecoins to the supply doesn’t solve the primary problem – which is a deficient demand. GHO’s struggle is that AAVE hasn’t been able to create enough demand for the stablecoin, which this strategy won’t rectify.”
In response, Stani Kulechov, founder and CEO of Avara, claimed, “Even though GHO hasn’t achieved a $1 peg, it’s currently generating substantial annualized revenue of 2.1M at an impressively small 35M mint cap. With the improving peg, GHO is positioning itself for scalability & increased revenue for the Aave DAO mine.”
Bluechip Stablecoin Ratings Accords a D Grade to GHO
Bluechip, a nonprofit and neutral stablecoin grading entity, was far from impressed with GHO’s performance and ranked it with a D grade, which was reflective of its stability and risk parameters. School-like Bluechip’s rating system, where A+ is the highest and F, the lowest possible score.
In Bluechip’s GHO assessment, the stablecoin’s inability to consistently perform on par with the $1 peg was highlighted, with the rating agency expressing its doubts about a quick recovery. This weak performance, according to Bluechip, is due to GHO’s “failure to have robust stability mechanisms to ensure a $1 peg.” Without a reserve redemption mechanism and low borrowing rates, GHO’s value is likely to further decrease.
Despite the negative rating, Bluechip is of the opinion that by bringing in changes to its design to enhance its stability, GHO can improve its rating to B or B+ level, while becoming a safe and decentralized stablecoin.
The Immediate Connect App
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Frequently asked Questions
1. What are the Bluechip Awards and why is GHO Stablecoin receiving a D grade?
Answer: The Bluechip Awards is a prestigious recognition program that evaluates various cryptocurrencies and blockchain projects. GHO Stablecoin has received a D grade due to its failure to enforce the dollar peg and the increasing criticism it has been facing.
2. What does a D grade from the Bluechip Awards mean for GHO Stablecoin?
Answer: A D grade from the Bluechip Awards indicates that GHO Stablecoin is not meeting the expected standards in terms of enforcing its dollar peg and has faced significant criticism. This grade can impact the stability and reputation of the stablecoin in the market.
3. How does the failing dollar peg enforcement of GHO Stablecoin affect its users?
Answer: The failing dollar peg enforcement of GHO Stablecoin can have negative consequences for its users. It may result in a lack of confidence in the stability and value of the stablecoin, potentially leading to financial losses or hindered usability for those who rely on it as a digital currency.
4. What has led to the rising criticism of GHO Stablecoin?
Answer: The rising criticism of GHO Stablecoin can be attributed to its inability to maintain a consistent dollar peg and its failure to address this issue effectively. Additionally, concerns about transparency, trustworthiness, and overall market performance may have contributed to the increasing scrutiny.
5. How does GHO Stablecoin plan to address the failing dollar peg enforcement?
Answer: GHO Stablecoin’s plan to address the failing dollar peg enforcement remains unclear at the moment. However, it is crucial for the stability and credibility of the stablecoin that they demonstrate a proactive approach in rectifying the issue and provide transparent communication regarding their remedial actions.
6. Is the D grade from the Bluechip Awards an indication of GHO Stablecoin’s long-term viability?
Answer: The D grade from the Bluechip Awards can be a concerning indication of GHO Stablecoin’s long-term viability. It suggests that the stablecoin has significant shortcomings in terms of its dollar peg enforcement and has not been able to gain the expected level of market trust and acceptance.
7. What impact can the failing dollar peg enforcement of GHO Stablecoin have on the broader cryptocurrency market?
Answer: The failing dollar peg enforcement of GHO Stablecoin can have a broader impact on the cryptocurrency market. It can potentially undermine the overall trust in stablecoins and highlight the importance of robust regulatory frameworks and enforcement mechanisms. This situation may also prompt investors and users to seek alternative stablecoin options that demonstrate better reliability and adherence to their stated pegs.