USDD is facing its most difficult test yet, with the US-pegged stablecoin falling to $0.9807 this morning at 07:52 UTC. At the time of writing, the USDD had recovered slightly but remained one cent short of the dollar, trading at $0.9902.
Bitcoin (BTC) has dropped 13.5% in the last 24 hours to $23,763.55, while Ethereum (ETC) has dropped by 18% to $1,197.16.
Blue Monday
The cryptocurrency market is still jittery on Monday after lending platform Celsius announced it would suspend all customer withdrawals. Following the collapse of Terra in May, the news has added to the market’s already negative sentiment.
The USDD de-pegging has only added to the growing sense of fear in crypto. Tron CEO Justin Sun responded by stating that the Tron DAO, which manages USDD, is “actively buying crypto… We will add reserve into [the] public address once [the] market is stable. Furthermore, #USDD return rate will refresh everyday.”
Sun and TronDAO have announced another 650 million USDC purchase in the last hour, bringing their total to $2.5 billion.
To safeguard the overall blockchain industry and crypto market, TRON DAO Reserve have increased 650,000,000 #USDC supply on #TRON. Currently USDC supply on TRON has reached $2.5 billion.
— TRON DAO Reserve (@trondaoreserve) June 13, 2022
TRON CEO Justin Sun promised to over-collateralise USDD by $10 billion at its launch. TRON’s total reserves in all currencies are still falling short of that target.
Collateral is not the only layer of defence that the TRON CEO has praised. Sun also promised that Tron’s “proper algorithms” would help keep the peg stable “regardless of market volatility.”
These tactics have now been put to the test, and they appear to be lacking in several respects.
Source: USDD
USDD on a wobbly peg
Despite the USDD’s shaky US-dollar peg, the stablecoin is still over collateralised by 277.54%, according to data on the stablecoin’s homepage.
USDD is collateralised by TRON (TRX), Tether (USDT), USD Coin (USDC), and Bitcoin reserves.
“We want to have USDD to be overcollateralised, which I think will make market participants more comfortable about using us in the future,” said Sun earlier this month.
Much of Sun’s script may sound familiar, especially to Terra customers. Both the $10 billion reserves and the breezy confidence of its executives are eerily similar to Terra before the fall.
Do Kwon said in March that Terra would acquire $10 billion worth of BTC as collateral for UST. The plan fell short.
For years, TRON has proven that anything other crypto projects can invent or innovate, Sun’s Tron can just as easily replicate.
In Terra and Do Kwon, Justin Sun should have found two examples he would not wish to copy with such haste.