- Tron’s USDD stablecoin has lost its dollar peg
- The Terra UST copy dropped to $0.974 overnight
- Justin Sun has ploughed in over $2.5 billion to try and save it
Tron’s algorithmic stablecoin, launched at the height of Terra mania, has continued to de-peg from the dollar, despite Justin Sun unleashing the contents of a $2.5 billion war chest to try and halt the slide. USDD, which is eerily similar to USDT in design, slipped to $0.974 despite the massive outlay, leading to many believing that the crypto space was set for a Terra UST-like collapse. Naturally, Justin Sun has been rallying the Tron troops on Twitter, but the longer USDD stays below $1 the more pressure will be put on both the USDD and the TRX token.
USDD On Thin Ice Already
Sun announced USDD in April, with Sun claiming that it would usher in “a fully decentralized stablecoin underpinned by mathematics and algorithms, bringing the development of stablecoin to the next level.” This “self-imposed revolution” was immediately accused of being a rip off of Terra’s then wildly popular UST stablecoin, using the same elaborate, automated balancing mechanism to keep the price afloat – similar to Terra UST’s relationship with the LUNA token, it relies on incentivising sellers and buyers to retain the peg, creating and destroying units of USDD and TRX.
USDD’s issues started yesterday when Sun revealed that short sellers were acting to push the price of the TRX token down. With TRX forming a large proportion of the billions of dollars backing USDD this pulled it off its dollar peg, not helped by other aspects of its collateral, including bitcoin, also falling. Sun then announced several injections of capital, claiming that a short squeeze on TRX was imminent, which would push the value of USDD back up.
However, this plan largely failed, with TRX falling to $0.57 overnight before creeping back up to the level at which he made this claim. This helped USDD temporarily, but the so-called stablecoin still remains more than $2 off its peg at the time of writing:
Sun has engineered several injections of capital totaling $2.5 billion, overcollateralsing USDD in the process:
— H.E. Justin Sun 🅣🌞🇬🇩 (@justinsuntron) June 13, 2022
Given the state of the market however, and the fact that USDD remains off its peg, Sun will have to almost empty the Tron coffers if he wants to save USDD, although as we saw with UST, if it enters a death spiral then not only will USDD go down but it could take TRX with it.
Watch this space.