From $64 to zero: Mark Cuban, Fred Schebesta caught out as Iron Finance defi project collapses
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A decentralised finance project called Iron Finance has collapsed in what the team is calling the “world’s first large-scale crypto bank run”.
The value of the Iron Titanium Token, which had soared from less than US$2 at the start of the month to over US$60 after being mentioned favourably by billionaire Mark Cuban on his blog, plunged to less than a millionth of a dollar this week.
The Binance Smart Chain project was a fork of Frax, an algorithmic stablecoin that Stockhead wrote about earlier this month.
Iron Finance consisted of the IRON stablecoin and the TITAN and STEEL share tokens.
Users had reported making as much as US$1,000 a day on a $25,000 investment in the project – a whopping daily percentage rate of 4.5 per cent.
In his blog, Cuban said he was getting an annualised return of about 206 per cent on his US$75,000 investment.
He gave enough details that Redditors were able to track down his wallet two days ago, further hyping the project.
Large investors (“whales”) in Iron Finance began to cash out as the token mooned, the project wrote in a post-mortem.
“Around 10am UTC on 16-June-2021, we noticed some whales began to remove liquidity from IRON/USDC, then sold TITAN to IRON and then IRON to USDC directly to liquidity pools instead of redeeming IRON, which caused the IRON price off-peg. TITAN dropped from 65$ to 30$ in 2 hours, which later recovered in 1 hour to 52$ and IRON fully recovered its peg.”
Users remained calm at first, but then around 3pm a few big holders began selling again.
“This time, after they started, a lot of users panicked and started to redeem IRON and sell their TITAN,” basically cashing out completely from the project, Iron Finance wrote.
“This caused a negative feedback loop, as more TITAN was created (as a result of IRON redemptions) and the price kept going down. A classic definition of an irrational and panicked event also known as a bank run.”
Not everyone was completely buying that explanation.
They cloned it without understanding how to maintain it.
No $FRAX clone has ever survived or ever will.
— Samuel McCulloch (@traders_insight) June 16, 2021
Nothing. It’s just there wasn’t enough value in the Titan-token, so the marketcap for it wasn’t enough to support the huge growth of iron, turning it into a Ponzi scheme.
— DeFiDubio 🧙♂️ (3,3) HNY (@DubioDe) June 17, 2021
I got hit like everyone else. Crazy part is I got out, thought they were increasing their TVL enough. Than Bam.
— Mark Cuban (@mcuban) June 16, 2021
Finder.com.au cofounder and director Fred Schebesta told Stockhead in a Twitter direct message that he had lost over US$100,000 in the project.
“It was $4 when I first saw it – and then in 48 hours it was $60! … I genuinely thought it would world.”
Schebesta said that a mechanism in the project’s algorithm that aimed to repeg the Iron stablecoin back to $1 after it lost that level “wasn’t configured correctly and then it spiralled out of control.”
Despite his losses, Schebesta said he thinks “defi is amazing and its booming. And I think its part of the future of finance.”
Finder’s new app now allows users to buy and sell Bitcoin in under three minutes, he noted.