TRON Stablecoin USDD Depegs From Dollar Despite Sun's Capital Deployment; TRX Tumbles

Justin Sun-led TRON deployed more capital to defend the algorithmic stablecoin USDD from depegging against the dollar but his best effort did not fare well as the decentralized stablecoin still lost its peg to the dollar, eventually leading the blockchain's native token TRX to tumble.

When Tron's USDD lost its peg to the dollar and traded at $0.97, fear, uncertainty and doubt flooded the crypto industry as many traumatized by the UST meltdown feared another similar scenario unfolding before their eyes.

Launched on May 5, a few days before Do Kwon's TerraUSD came crashing down, Tron's founder said USDD would be over-collateralized by low-volatile assets like Bitcoin, USDC and USDT to avoid the same thing that happened to UST.

But what happened to Tron's algorithmic stablecoin and why did it depeg from the dollar?

Tokenomics expert and advisor Eloisa Marchesoni, who goes by the Twitter handle @eloisamarcheson, explained the details through a thread.

According to Marchesoni, the members of the decentralized autonomous organization (DAO), or the organization created by developers to automate decisions and facilitate cryptocurrency transactions, tasked with maintaining the peg are currently in bad shape, underlining that one of the members is Sam Bankman-Fried's Alameda Research.

"Alameda was one of the 9 members of the #DAO tasked with maintaining the peg, and most of the other 8 are in bad shape (linked to 3AC collapse, Alameda/FTX collapse, or have had major hacks recently)," the tweet read.

The tokenomics expert noted that the USDD dip impacted Tron's received collateral and Curve Finance pool.

Sun, on Monday morning, shared on Twitter that he had swapped around $773,000 worth of USDD. "Deploying more capital - steady lads," the tweet read, seemingly resembling Kwon's tweet on the days leading to Terra's spectacular collapse in May.

While this is not the first time that a stablecoin depegged from the dollar, as Tether's USDT experienced the same in the past. The difference, however, is that USDT showed a swift recovery.

With the crypto market still reeling from the spectacular collapse of FTX and investors anticipating the upcoming interest rate hike from the Federal Reserve, it is normal for them to worry.

Despite Sun's efforts, USDD was trading up 0.60% at $0.9763, still below its 1:1 dollar peg, with a 24-hour volume of $114,651,411.

Meanwhile, TRX, the native token of the Tron blockchain, slowly recovered from its previous price of $0.05221. It was trading up 1.34% at $0.05292 with a 24-hour volume of $250,804,952, according to the latest data from CoinMarketCap.

Eloisa