Key facts:
Tron Reserve put up $2 billion to reverse the negative interest rate.
Other stablecoin like USDC also showed instability but recovered faster.
The recently launched stablecoin (stable cryptocurrency) native to the Tron network, Decentralized USD (USDD), has lost parity with the US dollar in the morning hours of this Monday, June 13, 2022.
Between 8 and 9 AM (UTC), the stablecoin had a market value below the dollar, an asset that must be replicated. In that time frame, USDD traded at USD 0.98. This represents a 2% drop from its ideal value.
As can be seen in the graph below, according to CoinGecko data, the cryptocurrency has not yet touched the price of 1 USD again at the time of writing this article. Although it reached USD 0.997, it continues with the instability that prevents it from returning to the value that it had been showing almost uninterruptedly in recent weeks, after its launch on May 5.
In addition to USDD, other stablecoins like USD coin (USDC)issued by the Circle company, has also had a depeg (parity loss) this morning. Although it fell to $0.97, it almost immediately recovered its parity and is now worth $1 again.
For its part, Tether (USDT), the leading stablecoin by market cap, was down 0.5%, which brought its price to USD 0.995. After a few hours “bouncing” from $0.996 to $1.01, it appears to have found stability again.
Also the Binance stablecoin, Binance USD (BUSD)showed unusual instability on the day. Its market value was able to fall to USD 0.985 on two occasions, at 3 and 7 am, but it resumed its path and is already trading at parity with the US currency again.
What is Tron doing to support USDD?
Tron Lead Developer Justin Sun posted a message on his Twitter account in which he explains that the decentralized autonomous organization (DAO) Tron Reserve will use $2 billion to reverse the effect of traders betting on short positions with the cryptocurrency Tron (TRX).
It should be noted that, in order to issue USDD, an equivalent amount of TRX must be burned. Considering the current situation, with an extremely bearish market and with the Tron stablecoin struggling to retain the peg (parity with its underlying asset), many traders appear to be betting on short positions. A) Yes, seek to generate returns from a further decline in the value of TRX.
Tron is trying to combat this situation because a very large drop in the price of TRX could lead to a decrease in the value of USDD. This is what happened about a month ago with the Terra network cryptocurrencies, terra (LUNC) and terra USD (UST).
Subsequently, was also reported a move of 700 million USDC to the Tron Reserve with the clear purpose of “holding” the USDD parity. With this, the collateralization index shown in the DAO official site rose to 278%, while total reserves rose to more than USD 1,290 million.
Taking into account that this number is less than the USD 2,000 million spent today, The transparency of the figures shown on the Tron Reserve portal is not clear and how the DAO manages its funds.
As reported in previous CriptoNoticias publications, the DAO Tron Reserve is intended to manage emergency reserves for situations in which USDD is at risk of losing its value. Last Saturday, June 11, he announced the purchase of 1,800 bitcoins (BTC) for that purpose.
The strategy, it has been pointed out, is similar to the one implemented by Terra and Fundación Luna for the stablecoin terra USD (UST). However, even when the Foundation wanted to sell the reserves to withstand the excessive selling pressure of its cryptocurrency, it was unable to cope with the debacle that led to the total collapse of the stablecoin.