- The Tron DAO has withdrawn 2.5 billion TRX tokens from Binance in order to thwart short sellers
- TRX was being actively shorted on Binance, which was causing the USDD dollar peg to falter
- The reduced ammunition has allowed the price of TRX and USDD to recover a little
The Tron DAO has attempted to shore up the USDD peg by withdrawing 2.5 billion TRX tokens from Binance. The DAO and founder Justin Sun took the step after realising that these shorts were pushing the price of TRX down and, as a consequence, keeping USDD off its peg. By removing the liquidity they hope that short sellers will have less ammunition, allowing the price of both USDD and TRX to return to their natural value, which they have started to do.
Short Sellers Targeted USDD Through TRX
USDD, an algorithmic stablecoin that is as different to Terra USD as a gorilla is to another gorilla, lost its dollar peg on Monday, slipping as far as $0.96, while TRX fell 38% in the same period. Of course, the entire market crashed at the same time, but TRX’s fall was more spectacular than other alts, and a stablecoin should never lose its peg anyway.
Sun blamed TRX short selling, which involves borrowing money to buy and immediately sell the token in question, for pushing the price of TRX down in order to send USDD into the kind of death spiral that killed LUNA and UST.
After deploying more than $2.5 billion dollars in the battle did no good, the Tron DAO agreed to take 2.5 billion TRX tokens, worth $1.35 billion at the time, off the table, giving less liquidity to those who were using it to short the coin:
Withdrawal coming 👀 https://t.co/Nf4Bn5dJj9
— H.E. Justin Sun 🅣🌞🇬🇩 (@justinsuntron) June 15, 2022
Price Recovering So Far
The ploy seems to have worked a little, in that at the time of writing TRX has bounced 25% in the last 24 hours and USDD is back at $0.977, but Sun and the rest of the Tron team will be hoping that this is just the start of the recovery rather than the end.
It also raises the uncomfortable spectre of this type of attack happening again at some point in the future if some deep-pocketed short sellers want to have a little fun at Sun and Tron’s expense.