The TrueUSD (TUSD) stablecoin hit a high of $1.2 on Binance after what appeared to be organic borrowing activity from DeFi users.

According to a May 2 report from Kaiko Research, TUSD began trading at a premium on a number of exchanges, trading 20 cents above Tether (USDT) at one point during the day.

Analysts believe that a depegging event like this one was all the more likely given the fact that TUSD’s liquidity has not kept pace with its volumes of late. After Binance made BTC-TUSD the only zero-fee pair on the exchange, it became the highest-volume pair in all of crypto, despite TUSD’s stature as one of the lesser-known stablecoins.

“Interestingly, as TUSD began to depeg, a number of users on both Aave and Compound began to borrow large amounts of the token. Most of these transactions appear to be organic rather than bot-driven,” said the Kaiko analysts. 

The most common strategy observed was users of these lending protocols shorting the stablecoin by borrowing TUSD and then swapping it for USDC. Seeing as neither Aave or Compound had a large supply of TUSD to begin with, borrowing rates for TUSD surged to 100% APR on both protocols. 

It was around this time when blockchain wallet trackers flagged a $50 million TUSD transfer from Justin Sun’s wallet to the Binance Launchpool. The exchange’s CEO Changpeng Zhao made it clear that action would be taken if the funds were used to buy up SUI tokens, prompting an apology from Sun who said the intent was to engage in market making the stablecoin.

“I must clarify, especially in regards to questions like whether TUSD ‘s new ownership is Justin Sun – no it is NOT. We also have no connection with the company which invested in Poloniex,” wrote a member of TrueUSD’s issuing corporation after the firm was acquired by Techteryx in 2020.

The Kaiko analysts noted that the TUSD-USDT pair has become the most liquid trading pair on Binance after a $200 million liquidity injection at the 1% level.