USDf Stablecoin Experiences Brief Depeg Following Community Concerns, Recovers After Clarification

On July 8, USDf, the stablecoin issued by Falcon Finance, briefly lost its dollar peg, dropping to $0.887 amid community-driven concerns. The price later recovered to $0.995 following a public clarification from Andrei Grachev, managing partner at both DWF Labs and the stablecoin issuer.

USDf is the primary stablecoin on Falcon Finance, a synthetic dollar protocol supported by DWF Labs, a well-known market maker. The protocol aims to provide sustainable yield opportunities through an overcollateralized model. Unlike traditional stablecoins backed solely by fiat or stablecoin reserves, USDf can be minted using a broader range of assets, including stablecoins such as USDT and USDC, as well as non-stablecoin assets like BTC and ETH.

According to Cointelegraph, skepticism around USDf emerged due to concerns about declining onchain liquidity, the quality of collateral, and limited transparency regarding reserve asset details. Some observers also questioned the potential for over-issuance and the level of centralized control over reserve management.

Falcon Finance Highlights 116% Collateral Ratio Following USDf Dip

In response to the incident, Grachev publicly addressed the situation on X, outlining the reserve structure behind USDf. He emphasized that the stablecoin remains strongly overcollateralized, with reserves totaling approximately $632.5 million. Of that, 89 percent, or around $565 million, is held in stablecoins and BTC, while the remaining 11 percent, approximately $67.5 million, is allocated to altcoins.

“Our reserves are audited, and overcollateralization ratio is 116%,” Grachev stated, reassuring the community of the protocol’s health and risk management framework.

Falcon Finance supports its ecosystem through delta-neutral, yield-generating strategies. Revenue is currently split between basis trading at 44 percent, arbitrage at 34 percent, and staking rewards at 22 percent. Grachev also noted that liquid OTC trades may provide additional yield during reserve rebalancing or when new altcoins are introduced.

To ensure long-term stability, Falcon follows strict risk parameters. These include a focus on market-neutral strategies, avoiding any directional trades. Each USDf token must be backed by a stablecoin or a hedged position with no market exposure. The protocol also caps open interest (OI) market share at 20 percent for any single asset to minimize concentration risk.

To further support transparency and build trust, Falcon Finance also posted on Twitter, stating, "We work with ht.digital to provide independent Proof of Reserves." The team added that Quarterly Attestation Reports and an ISAE 3000 audit, the highest grade conducted by Harris & Trotter LLP, are currently in progress.