In the altcoin market, stablecoins continue to come to the fore as they lose their stability. Most recently, a similar danger emerged for USDD. The concern in USDD, a stablecoin belonging to the TRON ecosystem, has also affected the TRX token. Here are the details…
USDD’s de-peg worries Bitcoin and altcoin community
Stablecoins continue to destabilize the cryptocurrency market. The latest to drop from its $1 value, de-peg, is Tron’s algorithmic stablecoin USDD. USDD is trading at $0.97 at the time of writing. It worries crypto users as it hasn’t been able to regain its stability over the past few days. USDD destabilization poses a particular risk to the DeFi protocol Curve, as the data reveals that USDD accounts for 86.10 percent of the USDD/3CRV pool. If USDD falls, it could be a big blow for Curve Finance.
cryptocoin.com As we reported, since Terra’s UST collapsed, the crypto community has been wary of stablecoins like USDD. This isn’t the first time USDD has lost its stable. When USDD lost its $1 fixed last month, Data platform Lookonchain reported that $548 million of its $990 million reserve was lost.
The data platform presented records of transactions showing that USDD creator Justin Sun sent $550 million from stablecoin reserves to three different addresses to settle loans. Also, Lookonchain claimed that 99 percent of the TRX tokens in USDD reserve are unusable. Thus, he implied that the collateral ratio of the USDD stablecoin reserve is only 50 percent.
What is the latest situation in prices?
Currently, TRX is down from $0.05458 to $0.05211. Cryptocurrency has recorded a drop of close to 4%. The coin’s decline seems to have mostly concentrated in the last hour.
USDD, on the other hand, broke down from its 1 dollar fixed to 0.96 dollars. It’s changing hands for around $0.98 at the time of writing. In the chart below, you can see the sudden drop. Coin seems to have started to recover in the last hour.
USDD also fell to $0.97 during the FTX crisis. Justin Sun accused Alameda of selling USDD to cover liquidity in FTX. However, onchain data revealed that the whales’ sale of USDD caused the stablecoin to plummet. Tron DAO Reserve manages the supply and collateral for USDD. Total collateral of USDD backed by TRX, Bitcoin, stablecoins USDT and USDC dropped to $1.45 billion, according to Tron DAO Reserve data. The margin rate has also dropped below 200 today.
Taking action against algorithmic stablecoins
The destabilization of stablecoins has caught the attention of regulators around the world. Last week, Japanese Deputy Foreign Minister Tomoko Amaya hinted that the nation may want to restrict algorithmic support of stablecoins. “The proposed review states that “global stablecoins should not use algorithms to stabilize their value,” Amaya said in a statement. It “strengthens the provision of redemption rights” for these, he said.
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