# DLLR price stability/fluctuations explained **URL:** \ **Category:** General Commons\ **Created:** [March 19, 2023, 10:54am UTC](https://forum.sovryn.com/t/dllr-price-stability-fluctuations-explained/2886 "2023-03-19T10:54:37Z")\ **Posts on this page:** 1\ **Showing post:** 3
**Author:** ![light](https://dub1.discourse-cdn.com/flex017/user_avatar/forum.sovryn.com/light/32/11_2.png) [@light](https://forum.sovryn.com/u/light)\ **Post date:** [March 20, 2023, 2:20am UTC](https://forum.sovryn.com/t/dllr-price-stability-fluctuations-explained/2886/3 "2023-03-20T02:20:17Z")
> [@aaron023](#): > > I’m looking for a deep dive into the mechanics or actions in the system that push the price below $1 There’s not much to this, it is simple supply/demand imbalance. If there is more supply than demand for DLLR then the price will fall below 1 USD, and vice versa, if there is more demand than supply then the price will go above 1 USD. > [@aaron023](#): > > I think it’s important to explain exactly how $DLLR maintains its peg in the same fashion beyond the broad answers I’ve received when asked previously and read in the wiki. DLLR inherits the stability mechanisms of its underlying stablecoins, which are currently DOC and ZUSD. With regards to the price floor: 1 DOC is redeemable for 1 USD of BTC as long as the amount-to-redeem is less than the value of nDOC₀ (a parameter in the Money On Chain protocol). And 1 ZUSD is redeemable for 1 USD of BTC minus a redemption fee (currently the redemption fee floor is 2.5%); so if the ZUSD redemption fee 2.5% this means 1 ZUSD (and, by proxy, 1 DLLR) has an effective floor price of `1 USD - 0.025 = 0.975 USD`, beyond which it becomes profitable to redeem ZUSD for BTC and arb the price back up to the floor. With regards to the price ceiling: 1 DOC can be minted by depositing 1 USD worth of BTC. So if the DOC (and, by proxy, the DLLR) price goes above 1 USD then it becomes profitable to mint 1 DOC, sell 1 USD worth, then keep the difference as profit. For the ZUSD ceiling, I’ll link my comment [here](https://forum.sovryn.com/t/mo-money-less-problems/2821/25) which discusses this in detail. > [@aaron023](#): > > What led me to ask this question is that if a user opened an LoC today for $10,000 and then swapped their DLLR/ZUSD to XUSD to actually do something with their funds beyond AMM/stability pool, they would lose ~$460 in the swap. The Sovryn AMM is not a stableswap AMM so it is going to have higher slippage on stablecoin pairs than if using an stableswap pool like Curve or Balancer. If/when BabelFish implements its [basket balancing incentive algorithm](https://forum.babelfish.money/t/bip-000x-babelfish-basket-balancing/239) we might see better pricing on stable pairs – TBD! --- _[View the full topic](https://forum.sovryn.com/t/dllr-price-stability-fluctuations-explained/2886)._