Tron blockchain founder Justin Sun has declared that US$2 billion will be deployed to “fight” investors shorting Tron’s native currency, TRX, in an attempt to stabilise the Tron-based algorithmic stablecoin USDD:
USDD lost its US dollar peg on June 13, dropping as low as US$0.91 on the KuCoin exchange.
Many investors now fear the Tron ecosystem may follow in the wake of Terra, which spectacularly collapsed last month after its algorithmic stablecoin, UST, suddenly and dramatically depegged. At the time of writing USDD had still not regained its peg. CoinGecko was reporting its price as US$0.98.
USDD Over-Collateralisation Fails to Prevent Depegging
The launch of USDD was first announced in April, just days before UST began to lose its peg.
In the wake of the Terra collapse, Tron announced USDD would become an over-collaterised stablecoin – that is to say that each USDD would be backed by more than US$1 in assets held in the Tron DAO Reserve. This move was intended to shore up investor confidence in the new stablecoin and to prevent the kind of depegging event we are now witnessing.
Since USDD lost its peg this week, the Tron DAO Reserve has added another US$650 million worth of USD Coin to its reserves in what it describes as an attempt to “safeguard the overall blockchain industry and crypto market”:
Sun Confident USDD Will Recover Peg
In his tweet about the depegging of USDD, Sun indicated that the massive shorting of TRX was the cause and he believes the deployment of US$2 billion to protect TRX will be enough to swiftly restore USDD’s peg.
Although Sun’s big talk may appease some Tron diehards, it likely won’t comfort the broader market. The Terra-based algorithmic stablecoin experienced a similar ‘minor wobble’ the day before it depegged catastrophically, with no amount of spending by the Luna Foundation Guard, the Terra equivalent of the Tron DAO Reserve, sufficient to save it.
Disclaimer: The content and views expressed in the articles are those of the original authors own and are not necessarily the views of Crypto News. We do actively check all our content for accuracy to help protect our readers. This article content and links to external third-parties is included for information and entertainment purposes. It is not financial advice. Please do your own research before participating.