The Waves (WAVES-USD) network has been carving out a name for itself over the last year. Indeed, the layer-1, lauded as an apt Ethereum (ETH-USD) competitor, shows big potential in disrupting top projects. But, the WAVES crypto has been in turmoil in recent days. Accusations of being a Ponzi scheme, as well as a stablecoin unpegging, are sending prices into a downward spiral.
Waves is a layer-1 blockchain network that has been around since 2016. It’s the brainchild of the Ukrainian-born, Russia-based Sasha Ivanov. What’s notable about the network is that it takes no cues from its competitors; it forgoes using Ethereum Virtual Machine (EVM), a software package that is used to build a significant portion of the world’s leading networks. Ivanov says this is because he wants “to do something completely differently” than Ethereum.
The network has picked up steam over the course of the last year, thanks largely to the surge of the crypto market in early 2021. Since then, the network has added a grip of new products, including its foray into non-fungible tokens (NFTs) with its duck hunt game. Users can combine NFTs into increasingly rare tokens by searching the web for ducks. Since launching, the game has turned into a full-fledged metaverse play on the Waves chain.
This fast success in these burgeoning industries has allowed Waves to land a place on the map. Indeed, its $3.7 billion market capitalization puts the WAVES crypto among the 50 largest coins in the world. Moreover, it has enabled the network to dip its toes into DeFi in a serious way, including with the launch of its Neutrino (USDN-USD) stablecoin. Unfortunately, though, this week is stirring up much trouble for the network.
WAVES Crypto Price Succumbs to Ponzi Scheme Accusations, Russia Ties
Fear, uncertainty and doubt (FUD) can be a powerful force within the crypto investing world. Sowing any bit of fear into the minds of investors can lead to a widespread exodus from a project. After all, who would want to risk losing their own money by investing in a project they aren’t sure of? This week, the WAVES crypto is suffering at the hands of FUD, and the results are devastating.
In late March, both WAVES and the USDN stablecoin were flying high. The WAVES coin reached an all-time high of more than $60, and USDN almost doubled its market cap, bringing it over $900 million.
However, things fell apart on Monday, with WAVES crashing over 50% and USDN being knocked from its $1 peg down to just 70 cents. Today, USDN is still rebounding, with tokens swapping at 88 cents. WAVES continues to crash, losing an additional 17% so far.
Much of this volatility can be attributed to Ponzi scheme accusations coming from across the industry. Crypto investors are accusing Waves developers of artificially pumping the coin by buying up coins themselves using liquidity from DeFi platforms. These comments began surfacing in the days prior to the price plunge.
Adding fuel to the fire were Ivanov’s own comments. The Waves founder went after FTX founder Sam Bankman-Fried, who he accused of shorting the WAVES crypto. Ivanov tweeted out a thread in which he fought against the rumors. Ivanov asserts that Waves growth is the result of its developers’ hard work. He then comments on Alameda Research’s short position on Waves; Alameda is a research and investing firm founded by Bankman-Fried. Ivanov alleges that Alameda is to blame for the price drop through its shorting and alleged “FUD campaigns.”
Where Will the WAVES Crypto Go From Here?
In the wake of these various online spats, WAVES and USDN prices continue to suffer. Caught in the middle of all of this are users of the Waves DeFi platform Vires. Vires is the platform alleged by investors to be supplying funds to Waves developers to pump prices. It is also the platform through which Ivanov accuses Alameda of manipulating WAVES crypto prices.
A proposal has cropped up, seeking to force the liquidation of the wallet Ivanov asserts is Alameda’s. This proposal would severely limit borrowing rates, and it does not seem to be very popular among users. Over the next five days, the community will vote on the measure.
In the meantime, the news continues to spur debate over the future of stablecoins. Will stablecoins like USDN be able to thrive without underlying reserves? Only time will tell. However, it’s worth noting that USDN is far from the first stablecoin without a reserve to fall off of its price peg this year.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.