Falcon USD (USDF) fell below its $1 peg amidst growing liquidity and collateral concerns, dropping to $0.9783. This decline has raised eyebrows in the DeFi community regarding the token's backing and governance. Concerns were voiced by Alex Obchakevich, founder of Obchakevich Research, about potential collateral quality issues affecting investor confidence. Unlike fiat-backed stablecoins, USDF is minted by locking up volatile digital assets. Current liquidity sits at $5.51 million, highlighting a drop that compounds investor anxiety. In contrast, Andrei Grachev of Falcon Finance claims that 89% of collateral consists of stablecoins and Bitcoin, asserting USDF is overcollateralized at 116%. He noted that USDF's peg is upheld by traders adjusting supply based on market demand. Critics, however, including pseudonymous developer 0xlaw, allege mismanagement and potential risks due to reliance on illiquid assets, suggesting that the collateral may not sufficiently cover the stablecoin’s issuance. A DeFi research group, LlamaRisk, also flagged operational management concerns regarding the reserve assets. These issues point to uncertainty within Falcon USD's operational framework and investor trust.

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