Decentralized Borrowing Protocol Liquity’s LQTY Token Soars Amid USDC Chaos

LQTY, native token for decentralized borrowing protocol Liquity, has gained massive interest following the chaos from the depegging of the second largest stablecoin by market capitalization, Circle’s USDC.

The price of LQTY, the secondary token for decentralized borrowing protocol Liquity, was up nearly 20% in the past 24 hours – placing it among the best-performing crypto assets for the period. Moreover, LQTY has soared nearly 500% since the start of the year and was trading around $3.33 at presstime.

The most recent price action came after investors balked at Circle’s USDC stablecoin. The dollar-pegged crypto’s loss (whose weekend woes stemmed from $3.3 billion in then-inaccessible bank reserves at Silicon Valley Bank) has been a win for Liquity, a decentralized platform for taking out loans denominated in protocol’s primary token, LUSD.

Liquity’s LUSD "clearly managed to take center stage during the USDC depeg panic, and that’s likely caused some investors to take a second look at" LQTY, said Andrew Thurman, head of research for data company Nansen.

While LUSD is meant to retain its dollar peg, Liquidity’s secondary token LUSD has seen the upside. LQTY, which has a total supply of 100 million and a market capitalization of $314 million, per CoinGecko, captures the fee revenue generated by the Liquity protocol, which are then paid out to stakers.

Data from Nansen shows a 10% jump in wallets holding the LUSD stablecoin since March 6, indicative of a new stablecoin narrative following the depegging of USDC.

Liquity allows users to deposit ether ETH$3,085.58 into the protocol as collateral and take out loans denominated in U.S. dollar-pegged stablecoin LUSD. Instead of charging a variable interest rate for drawing loans, Liquity has a 0% interest rate, charging users a one-time fee.

With a total value locked (TVL) of $683 million, according to data aggregator DeFiLlama, Liquity has generated $30 million in lifetime revenue. As of March 11, users have borrowed almost $4.5 billion LUSD, according to a dune dashboard created by a Liquity developer.

Currently, more than 52 million LQTY worth about $184 million has been staked, which represents 52% of the total supply of LQTY, per blockchain explorer Etherscan.

Binance, which opened up trading for spot trading pairs LQTY/BTC and LQTY/USDT on Feb. 28, currently owns roughly 11.57% of the total LQTY supply, data from blockchain analytics firm Nansen shows.