ETH’s recent price drop and network overload had a negative effect on the Ethereum-collateralized, decentralized DAI stablecoin – 2 collateral contracts closed and DAI’s price temporarily dropped, but then it recovered in 2 hours, although it lost 6% of its market cap.
On Tuesday Ethereum fell from $190 to $155 in 2 hours time. While the price has since recovered to $169, the network is still experiencing congestion and high Gas fees.
When the DAI drop started, the stablecoin briefly lost its dollar peg as a result of the collateral liquidations needed to cover the extreme movement of ETH.
Maker DAO accepts ETH collateral to issue DAI, but if the ETH price moves too sharply, the automated system liquidates CDPs once their collateralization ratio has dropped below 150% to reduce losses.
DeFi protocol management service DeFi Saver announced the struggle on Twitter:
The system “failed to protect 2 monitored CDPs, which have been liquidated in the process,'' read the announcement. At the same time, the ETH congestion has proved the reliability of other components of the system:
“On the other hand, 20 unique CDPs have been automatically protected by the system during this recent crash. All other monitored CDPs are currently safe and within their configured ratios. Gas prices have been adjusted accordingly and Automation is working properly”
On 25th of September, DeFi Saver reported that all automation is running properly and promised to publish a full report in the coming days.
At press time, the stable coin’s price has recovered and now DAI is trading at $1.00, according to COIN360 charts.