Dego Finance Crashes 60% as USD1 Liquidity Initiative Sparks FUD

Dego Finance (DEGO) price took to a free fall amid community FUD (fear, uncertainty, and doubt) following an announcement on Wednesday, June 4.

The announcement involved USD1 stablecoin, launched by the Trump family’s World Liberty Financial.

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DEGO Price Drops 60%: What Caused The Crash?

The DEGO price, the native token of Dego Finance, dropped nearly 60% following the project’s announcement that it would support USD1, a stablecoin by World Liberty Financial (WLFI), as part of a new liquidity initiative on the BNB Chain.

“We’re officially purchasing $USD1 World Liberty Financial as a liquidity reserve and supporting the liquidity program launched by World Liberty Financial (WLFI) on BNB Chain. This move reflects our commitment to building a stronger DeFi ecosystem — and exploring deeper collaborations with USD1 as we assemble the decentralized LEGO of Web3,” read the announcement.

The team framed the move as a strategic step to strengthen DeFi infrastructure. Notwithstanding, the market reaction was swift and brutal.

DEGO’s price collapsed, and the Relative Strength Index (RSI), a momentum indicator, dropped to oversold territory.

This drop suggests fear and confusion among holders. Some community members supported the rationale behind the decision, but acknowledged why the move was concerning.

“Team adding liquidity of DEGO on USD1 allows users to trade DEGO with a stablecoin, improving market access and price stability… by chance this liquidity creates FUD,” one user noted.

In crypto, adding liquidity typically means providing a pool of assets, such as DEGO paired with USD1 to a decentralized exchange (DEX) to facilitate trading.

This should make it easier for users to buy and sell DEGO without relying solely on other volatile cryptos, potentially stabilizing its price. However, several factors likely contributed to the FUD.

Among them is that more than half of USD1’s liquidity on PancakeSwap DEX comes from just three wallets, raising questions about “real demand.” BeInCrypto reported that three wallets hold 93% of its market cap.

If USD1 itself lacks organic usage and is propped up by a few large players (likely market makers or the team behind it), this could create skepticism among DEGO investors.

Therefore, investors might worry that the liquidity pool for DEGO/USD1 is artificial or manipulated. Such concerns could lead to uncertainty about the true value of DEGO.

The market perceives that USD1 is not widely adopted or trusted, making pairing DEGO with it a risky or questionable move, hence the FUD.

Dego Finance Assures Community Amid Panic

Against this backdrop, there are concerns that DEGO may be a scam project, highlighting growing distrust among certain retail investors.

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Addressing community fears, Dego Finance released an official statement on Thursday, June 5, following a sharp selloff to calm investor nerves.

“We’re aware of the recent price volatility following the announcement on June 4th, which has understandably caused concern across the community. First and foremost, we want to emphasize: there have been no changes to DEGO’s fundamentals, tokenomics, or long-term vision,” Dego Finance explained.

The team attributed the price drop to short-term market sentiment rather than any underlying flaw in the project.

“The sell-off appears to be driven by short-term market reactions, and we are actively reviewing both on-chain data and external factors to ensure transparency,” the team explained.

Dego Finance committed to working closely with “key partners and exchanges to maintain stability.” The project also emphasized that its long-term mission remains intact: to build a resilient, decentralized incubator driving innovation in DeFi, AI, and Meme culture.

The company also promised upcoming updates and developments, urging the community to stay engaged as more information becomes available.

Meanwhile, it is worth noting that this is not the first time DEGO has suffered a steep price crash. In 2021, the token fell by 51% in just three minutes after being listed on Binance Launchpool. Reportedly, the cause of that drop remains unclear to this day.

The latest market reaction reflects a lingering fragility in investor confidence, with DEGO token trading for $1.26 as of this writing.

The post Dego Finance Crashes 60% as USD1 Liquidity Initiative Sparks FUD appeared first on BeInCrypto.

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