Key Takeaways:
- The USDD stablecoin based on TRON is the newest digital asset to be put in jeopardy.
- The USDD stablecoin, created by Justin Sun, no longer has a dollar peg. Prior to an hour or so, the USDD decreased to $0.970.
The USDD token was debuted by the Tron network in April 2022 as a “over-collateralized stablecoin,” which means that the amount of reserves backing its valuation should decrease the chance that it will fall below $1.
Decentralized USD (USDD), the algorithmic stablecoin supported by Justin Sun, the founder of the Tron network, fell from its $1 anchor as investors’ faith in more generalised crypto markets was shaken by the collapse of the well-known cryptocurrency exchange FTX.
The USDD pool was out of balance relative to the USDC, USDT, and DAI, with USDD making up 82.27% of the total.
Even peckshield issued an alert stating, Stablecoin $USDD now $0.98.
It was noted that on November 8, a whale transacted 4.49 million USDD for 4.46 million USDT at a ratio of 0.9935. The stablecoin started to lose its peg at this point.
A different whale address also transacted 6.65 million USDD for 6.52 million USDC on November 9 at a ratio of 0.9799.
However, it’s crucial to remember that many people are unaware of the 60% decline in USDT utilisation. If it occurs this cycle, the $USDT rug will represent an almost total surrender of this bear market.
Tron DAO Reserve (TDR), which also acts as the custodian of its collateral, is the entity that issues USDD. In the event of a sell-side shock, TDR is primarily accountable for selling the collateral to keep the USDD pegged.
Almost all of the stablecoin collateral in TDR’s reserve wallets is currently staked in JustLend, the biggest lending protocol in the Tron ecosystem by total-value-locked transactions, and earning yields there (TVL). Meanwhile, a “staking governance” contract contains 99% of the TRX collateral.
The collateral information discovered that more than 99% of Tron’s TRX was “unavailable.” Additionally, Justin Sun’s decentralised lending platform Justlend received the entire USDC deposit.
As a matter of fact, compared to Terra’s UST, Tron’s stablecoin has fewer users, so a probable breakdown is not plausible to have the same negative effects.
It began in May, shortly after the USTC stablecoin of the Terra network lost its dollar peg and sparked a full-fledged crisis in the larger digital asset market.
The de-pegging of stablecoin prices from their assumed exchange rate is a surefire indicator of a liquidity crisis in the cryptocurrency market. Several stablecoins lost their pegs in May and June, and cryptocurrency companies like Three Arrows Capital, Voyager Digital, and Celsius Network experienced liquidations.
