What happened

Waves (WAVES 0.53%), one of the top-performing cryptocurrencies of the year, was getting crushed Monday after Neutrino USD (USDN), the stablecoin in Waves' ecosystem, lost its peg to the dollar Monday morning.

As of 9:29 p.m. ET on Monday, the cryptocurrency was down 28.4% over the past 24 hours.

A person sitting and holding their head against a backdrop of a falling stock chart.

Image source: Getty Images.

So what

Waves is a Layer-1 cryptocurrency blockchain, similar to Ethereum, that allows for smart contracts and decentralized applications (dApps). One of its primary use cases is creating the stablecoin Neutrino USD, an ecosystem that is similar to Terra with its Luna native token and its stablecoins pegged to multiple fiat currencies. However, the value of Neutrino suddenly fell on Monday, dropping as low as $0.69, losing its peg to the dollar and making the stablecoin worth significantly less than it's supposed to be. The loss of Neutrino's dollar peg could lead to lack of trust in the cryptocurrency and also shows that supply and demand for Neutrino and Waves is not functioning as it's supposed to. 

This collapse was predicted in a long thread on Twitter last Thursday by a person who accused Waves of engineering a spike in its price by borrowing USD Coin to buy Waves. However, according to a post on decrypt.co, Waves founder Sasha Ivanov countered that the price of the crypto was being manipulated by short-sellers.  

Now what

Even after the sell-off, the value of Waves had more than doubled year-to-date. However, the cryptocurrency could continue to fall  if its stablecoin can't maintain its peg, especially since it still has a market cap around $4 billion. .