The crypto market opens the week badly. Markets are red. First, the Celsius network announced that withdrawals and trading were halted due to extreme market conditions. Now, TRON’s USDD stablecoin has split from the US dollar stablecoin, i.e. de-pegged, just like the LUNA thing. Markets are red. Here’s what happened…
New LUNA? Tron’s stablecoin has lost its stable
The news of De-peg was announced by Justin Sun of Tron on Twitter. It seems that the disruption in the USDD market was due to the negative funding rate reaching 500 percent for TRX shorts (open positions) on Binance. As a result, Tron’s algorithmic stablecoin USDD fell slightly from the USD. USDD lost 1.5 percent of its value. It is currently trading at $0.9886.
A stablecoin to USD pegging provides a 1:1 ratio between stablecoin and USD. This increases liquidity in terms of cryptocurrency facilitated by stablecoin as opposed to fiat. According to Justin Sun, USDD’s departure from the USD does not seem like such an extreme event. While announcing the disruption, Sun stated that the situation will be resolved in a short time and the disruption will not last even 24 hours. He also hinted that Tron will use $2 billion in TronDao reserves to combat Binance short-term funding rate and facilitate USDD re-fixing.
$700 million injected to protect USDD
Justin Sun also said that approximately $700 million worth of USDC was deployed as part of the $2 billion reserve set aside to support USDD. At the time of this writing, USDD is trading at $0.99. The coin seems to be rebounding from the de-peg that previously dropped to $0.98. Tron’s USDD is an algorithmic stablecoin. Such stablecoins came under intense scrutiny after the collapse of Terra’s UST. But it seems that TRON was prepared for emergencies and acted early enough to deploy reserves to keep it stable.
At this time, TRX’ Its price has dropped more than 15 percent in the past few hours. The token is currently trading around $0.064. It is thought that the injection of cash from the DAO Reserve could indeed counteract short position trades by supporting TRX prices with liquidity. Short squeeze is also among the possibilities following Sun’s $2 billion cash distribution. As Kriptokoin.com have reported in our previous articles, during a short squeeze, the price of an asset or token rises. It liquidates traders who trust that the price will drop. Traders must then close their positions and buy back the token.
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