the French JustMining in turmoil

the French JustMining in turmoil

In a press release, the French cryptocurrency specialist announces “significant consequences” on its lending product.

A wind of panic is blowing through the stablecoin market, and the first consequences are beginning to be felt. The French company Just Mining, which notably offers crypto investments for savers, has just paid the price. In a press release published on Wednesday, Just Mining indicates that “this event has important consequences” on its lending product.

In fact, Just Mining announces that its lending product has an exposure to the UST of nearly 40% (39.58% more precisely). However, with the fall in the price of the latter, some customers will lose part of their bet. The company offers them two options: withdraw their funds and take losses or leave them hoping for a rise in the price of the UST to the level of the dollar. If the user chooses to immediately exit the position, the approximate loss calculated based on the UST will be communicated just before the final validation:

“For example, with a UST at $0.52 (11.05.22 at 4:30 p.m.) and an exposure at 39.58% of the lending, a client under these conditions will validate a loss of 18.98% of his position”, specifies Just Mining .

For those who want to stay, and bet on a rise, “you agree to take the risk of losing up to 39.58% of your portfolio in the event of a drop in the UST to $0. On the other hand, if the price of the UST returns to its original value, your loss will be non-existent (or reduced) if it manages to regain its parity with the dollar.”

This Thursday around 9:50 am, the UST was worth 0.6 dollars, or 40% less than its promise of parity with the dollar.

In its press release, Just Mining clearly states that there are 3 types of risk on lending products:

  • the volatility of the underlying (here the US dollar)
  • the risk of a technical failure of the protocol used
  • the risk of parity between the stablecoin and its underlying, the so-called “de-peg” or “loss of parity”

“Today, the fall in the price of UST confronts us with risk number 3: the loss of its parity with the American dollar”, summarizes Just Mining.

A cover of 1250 dollars

For some users, who thought they were safe and not exposed to UST, this is a bad surprise. Indeed, as the company specifies in its press release: “Regardless of the stablecoin in which you invest on our platform, your capital is divided into different stablecoins”, including the UST.

Clearly, when a user subscribed to a stablecoin A, JustMining could convert it into A, B, C, D… A process which was however specified in the general conditions of sale.

In order to prevent its customers from losing all their funds, Just Mining guarantees to cover its affected customers up to 1250 dollars, “thus allowing full coverage for 73% of our customers using this service and partial coverage for the others”, states the press release. An “exceptional, albeit modest gesture” which “illustrates our desire to support you as much as possible”, continues the company.

In other words, a client who had invested $1,000 in Just Mining’s lending product and who decides to exit will not have to record any losses. On the other hand, someone who has bet $10,000 will only have coverage on $1,250.

It should be specified that only lending products are affected.

“The stablecoins in wallet and the other products of the platform are not impacted by this drop”, specifies Just Mining. In response, the French group has also decided to “put the lending product under maintenance for a few days until the situation is restored”. Before adding: “A communication will be carried out soon in order to present you additional information”.

Jean-Louis Dell’Oro with Anne-Katell Mousset