USDD has experienced a slight de-peg but TronDAO reserve will deploy $2 billion to support a re-peg.
The crypto market is opening the week on a bad footing. The markets are in the red. First, the Celsius network announced a stoppage of withdrawals and swaps due to extreme market conditions. Now, TRON’s USDD stablecoin has de-pegged from the USD. The markets are in the red.
News of the de-peg was broken on Twitter by Tron’s Justin Sun. Apparently, this disruption in the USDD market was brought about by a negative funding rate for TRX shorts on Binance which amounted to -500% APY. As a result, Tron’s algorithmic stablecoin, USDD, experienced a slight de-peg from the USD.
Justin Sun said Funding rate of shorting TRX on Binance is negative 500% APR. Trondaoreserve will deploy 2 billion USD to fight them. His algorithmic stablecoin USDD has a slight De-Peg. But due to the small market value, Justin Sun can easily Maintain PEG. https://t.co/JsYRkw3Srw
— Wu Blockchain (@WuBlockchain) June 13, 2022
USDD has lost 1.5% of its value and is currently trading $0.9886
$2 Billion To Re-Peg
A stablecoin’s peg to the USD ensures a 1:1 ratio between the stablecoin and the USD, and this boosts liquidity in terms of cryptocurrency facilitated by the stablecoin as opposed to fiat. According to Justin Sun, the de-pegging of USDD from the USD doesn’t seem to be much of an extreme occurrence.
While announcing the de-peg, Sun opined that the condition will be resolved shortly and the de-peg won’t even last for 24 hours. He further intimated that Tron would use $2 billion in TronDao reserves to fight the Binance shorts fundings rates and facilitate the USDD re-peg.
$700 Million Already Injected
Justin Sun also sent out an update, saying that about $700 million worth of USDC has already been deployed as part of the $2 billion reserves set aside to support USDD. At the time of this writing, USDD is trading at $0.99. The coin seems to be recovering from the de-peg that had earlier taken it down to the $0.98 levels.
700 million USDC has been injected into @trondaoreserve for #USDD peg. Well done! https://t.co/r11PnBte4g
— H.E. Justin Sun 🅣🌞🇬🇩 (@justinsuntron) June 13, 2022
What’s With Algorithmic Stablecoins?
Tron’s USDD is an algorithmic stablecoin. These types of stablecoins have come under intense scrutiny of late after the collapse of Terra’s UST. However, it seems that on its part, TRON was prepared for emergencies and took action early enough to deploy the reserves to maintain the peg.
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