TRON DAO purchased 10 million USDD to stabilize the stablecoin USDD’s price. The decision comes at a time when the altcoin market is recovering. It is thought that TRX and USDD will suffer a similar fate as they have a Terra-like algorithmic mechanism.
As the altcoin market recovers, Tron announces acquisition of 10 million USDD
TRON DAO Reserve announced that it has purchased 10 million USDD to protect the blockchain and crypto market. Justin Sun and TRON DAO say this move was taken to protect the market.
To safeguard the overall blockchain industry and crypto market, TRON DAO Reserve have purchased 10,000,000 #USDD on #TRON.
— TRON DAO Reserve (@trondaoreserve) June 20, 2022
Tron’s stablecoin USDD lost price stability in volatile market conditions a few days ago. As a result, the dollar intervenes from the TRON DAO to gain stability. After the price stabilized, Tron DAO Reserve took action to bring USDD back to its previous level.
USDD removed approximately 5.5 billion Tron (TRX) from exchanges to raise its collateral and stop the stablecoin’s price from falling further. However, it seems that USDD continues to fluctuate for now. USDD is trading at $0.9601, according to Coinmarketcap data.
USDD’s market value decreased by nearly $19 million last week
USDD’s market size has dropped from $715 million on June 13 to currently $696 million. Tron DAO has recently increased its reserves to counter this instability. cryptocoin.comAs we have reported, it added another 300 million USDC to its reserve last week.
It was an intriguing development, especially when USDD first hit the market in April 2022. It functions as a native stablecoin for Tron Blockchain. However, algorithmic stablecoins are currently ticked off because of the Terra example. As with the latest UST, the collapse of algorithmic stablecoins is unpredictable. It looks like the USDD is losing its stability to its $1 value.
On the other hand, famous Terra researcher Fatman is confident that USDD will not be like UST. It warns investors not to short (short) USDD. According to the expert, Justin Sun’s stablecoin will soon regain a 1:1 ratio with the dollar. About this, Fatman noted in a recent tweet:
USDD, another algorithmic stablecoin, fell sharply to $0.937. Some of you have plans to make a game, assuming this is the next UST. Don’t mess with USDD. It won’t be good for you, I promise. It’s not like UST.
What is an algorithmic stablecoin? Why is it important for the altcoin market?
Most stablecoins are backed by cash or similar reserves. However, algorithmic stablecoins use math and incentive mechanisms to maintain fiat stability. Various mechanisms come into play for stablecoin’s price stability. Like the LUNA-UST, USDD is backed by TRX and other reserves. We have seen at Terra that this mechanism can collapse with short selling. Due to the market repercussions of this, concerns about algorithmic stablecoins are common for now.
