Wednesday was the third consecutive day that Tron’s Decentralised USD (USDD), an algorithmic stablecoin inspired by TerraUSD, traded below $1.
According to CoinGecko statistics, the coin fell as low as $0.959 before recovering to $0.974. USDD employs the same algorithmic approach of issuance and destruction as the defunct TerraUSD (UST). When the price of USDD falls below one dollar, the system permits the burning of one USDD to create one dollar’s worth of Tron.
USDD initially decoupled from the dollar on Monday amid a more considerable crypto market decline. Previously, it traded at about $0.98, followed by a decrease. As a result of the USDD de-peg, the price of Tron (TRX) fell by around 16% to $0.05 today.
As USDD loses its dollar worth, Tron may come under intense pressure. This is comparable to how UST’s de-peg caused LUNA to implode last month.
USDD/USD chart. Source: CoinMarketCap
The Tron DAO Reserve, an entity aiming to protect USDD’s peg, has accumulated assets to support the stablecoin’s value. It purchased over 1 billion USDC and has assets worth an extra $500 million, including USDT, bitcoin, and Tron. However, the building of cash reserves by the team has not yet restored faith in the USDD’s worth.
Tron DAO will withdraw 2.5 billion TRX (about $125 million) from the Binance exchange to prepare for the worst-case scenario. The company can restrict traders from placing huge short bets on the asset by removing its token from exchanges. This assures Tron DAO can retain a sufficient quantity of TRX tokens to redeem USDD holders.