> ## Documentation Index
> Fetch the complete documentation index at: https://pegana.xyz/docs/llms.txt
> Use this file to discover all available pages before exploring further.

# GHO traded sub-$0.97 for eight months — when mint-only is the design flaw

> Aave's GHO launched July 2023 with a mint cap and no symmetric burn path. The peg stayed below parity for nearly a year before governance fixed the mechanism.

<Info>
  **Asset**: GHO · **Class**: CDP · **Date**: 2023-08-15
  **Worst spread**: −550 bps · **Duration**: ≈ 8 months below \$0.99
  **Detected live**: No (pre-Pegana retrospective)
</Info>

## Background

GHO is Aave's native stablecoin, minted by users depositing supported collateral
(mostly ETH and aTokens) and paying a borrow rate. At launch it had no Peg Stability
Module — the only way to mint was open a CDP, the only way to retire GHO was repay
debt. **That asymmetry is a structural depeg trap.**

## Trigger

Within weeks of launch GHO was trading $0.97–$0.98 on Curve and Balancer. The 1.5%
borrow rate let arbitrageurs mint GHO at $1, sell at $0.98, pocket $0.02 minus
borrow cost — and that flow set the floor. **Without a symmetric mint-to-$1 path from
anyone holding GHO, the market couldn't reach back up.\*\*

## Cascade

* Curve's GHO/3CRV pool stayed permanently imbalanced — depositors collected fees
  but couldn't restore the peg.
* Aave's borrow rate was too low to choke off new supply; raising it would have hurt
  legitimate borrowers.
* Each new mint cap increase moved the price lower as fresh GHO hit thin secondary
  liquidity.
* Other CDP stablecoins (crvUSD, LUSD) traded near-parity during the same period —
  the issue was specifically GHO's mechanism.

## Recovery

Aave governance shipped two interventions:

1. Raised the GHO borrow rate to \~5% to slow mint flow.
2. Added a GHO Stability Module (GSM) allowing 1:1 swaps with USDC and USDT inside a cap.

Both took until Q1–Q2 2024 to stabilize the peg back near \$1.00.

## What Pegana would have shown

* **August 2023, week 1** — GHO crosses 100 bps spread. **`PEGGED → DRIFT`**.
* **August 2023, week 3** — Spread crosses 200 bps. **`DRIFT → DEPEG`**.
* **August 2023 to \~Q1 2024** — Spread fluctuates 250 – 550 bps. **State stays in
  `DEPEG` for \~8 months** with brief `DEPEG → DRIFT` ducks when borrow rate hikes
  bit, then back to `DEPEG`.
* **Q2 2024** — GSM lands; spread compresses sustainably below 50 bps. After exit
  dwell, **`DEPEG → DRIFT → PEGGED`**.

A protocol watching GHO's `time_in_DEPEG` would have measured 240+ days of sustained
under-peg state — a structural signal of a mechanism that was designed wrong, not a
shock that needed to pass.

## Lesson

A stablecoin without a symmetric mint/burn path is a one-way valve. Watching the
daily price for a sub-1% deviation misses the structural signal — eight months of
\$0.97 is a different kind of depeg than a 48h spike. Pegana's EWMA-smoothed state
machine catches both: short shocks emit transitions, and sustained drift accumulates
into DEPEG-state durations on the events feed.

## Sources

* [Aave Governance — GHO Stability Module proposal](https://governance.aave.com)
* [Aave Labs blog — GHO launch](https://aave.com)
* [DefiLlama — GHO stable page](https://defillama.com/stablecoin/gho)