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Asset: DAI · Class: CDP · Date: 2023-03-11 Worst spread: −1100 bps · Duration: ≈ 56 h outside PEGGED Detected live: No (pre-Pegana retrospective)

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Background

By Q1 2023 the Maker PSM (Peg Stability Module) had absorbed enough USDC to push USDC’s share of DAI’s reserves to about 52%. The PSM converts 1 USDC → 1 DAI 1:1, which is great for the peg until the asset on the other side of the conversion is the one breaking.

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Trigger

Circle’s SVB disclosure on March 10 sent USDC into a freefall. DAI followed within the hour — the market priced DAI as if it were a 50%-USDC-backed claim, because that’s what it was. Worst prints landed near $0.885 on Sunday March 12 across Curve and several CEX venues.

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Cascade

  • MakerDAO emergency-paused USDC-side PSM swaps to stop USDC from being dumped into the peg module at par.
  • DAI lending protocols (Aave, Compound) saw collateral re-valued; some borrowers were liquidated against intra-incident lows.
  • Curve’s 3pool absorbed enormous imbalance flows — LPs printed losses on both legs (USDC down, DAI down).
  • Tether and other USDC-light stables briefly traded above $1 as a flight-to-quality bid.

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Recovery

Once the FDIC/Treasury backstop landed on Sunday evening and USDC began re-pegging Monday morning, DAI converged within hours. The full episode lasted ~60 hours start-to-finish.

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What Pegana would have shown

  • Friday ~22:30 UTC — USDC enters DRIFT. DAI follows within minutes — its intrinsic-equivalent (the reserve composition) was visibly impaired. PEGGED → DRIFT on DAI fires shortly after USDC’s.
  • Saturday ~04:00 UTC — Spread crosses 100 bps on DAI. DRIFT → DEPEG.
  • Sunday ~04:00 UTC — Thin Sunday DEX prints push DAI below $0.89. DEPEG → CRITICAL (or stays in DEPEG depending on per-asset critical threshold).
  • Monday ~15:00 UTC — Sustained recovery. Hysteresis exit cascade. CRITICAL → DEPEG → DRIFT → PEGGED over ~3 hours.
The DAI alert would have been correlated with USDC’s by timing alone — a useful signal that the contagion was crossing assets.

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Lesson

CDP-style stables built on top of fiat-stable collateral inherit that collateral’s tail risk. The peg holds only as well as what backs it. Pegana tracks Hylo’s collateral ratio on-chain for exactly this reason — a SOL-collateralized CDP doesn’t share USDC’s fiat-bank tail, but it has its own SOL-volatility tail you need a number for. See Hylo CDP CR signal.

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Sources