Due to the supply of crypto and growth in capitalisation as a result of high profitability from staking, stablecoins found themselves at risk of experiencing a market-wide drop. Emotions are still running high over UST (Terra) as the Tron network's USDD faces a systemic crisis.
In April, the stablecoin UST was among the Top 3 cryptocurrencies by market capitalisation with a value of $20 billion, most of which was put into the Anchor platform for a 20% annualised return. To maintain UST's peg to the US dollar, Terra used both its internal LUNA coin and a $3 billion crypto fund.
Image source: defillama.com
It is uncertain whether the failure was caused by insufficient system stability, an external attack or vindictive actions by employees. South Korean police are investigating the latter matter. Nevertheless, UST lost its peg to the dollar, after which the crypto fund became depleted, and Luna collapsed.
On 5 May, Justin Sun presented the new stablecoin USDD, which is a calque of UST. Just as LUNA provided stability to UST's rate, TRX of the Tron network is responsible for maintaining USDD's peg to the dollar. To attract investors to his project, Sun offered a return of over 30% for staking.
Initially, this had an effect, and TRX rose in May.
Image source: StormGain.com
However, the honeymoon didn't last long. USDD lost parity with the dollar on 13 June, and TRX fell by 22%.
Image source: coinmarketcap.com
Now Tron is trying with all its might to return its exchange rate back to normal. On 15 June, the network announced the purchase of additional TRX worth 100 million USDC. Apparently, this wasn't enough since the stablecoin is still trading at a discount.
Sun continues to laugh it off on social networks and wonders why USDD has low confidence even though its reserve is treble the coin's issuance. On the other hand, the community is unclear as to why Tron is unable to maintain a stablecoin exchange rate if it has sufficient collateral.
Image source: tdr.org
The coming days could prove especially difficult for Tron and its investors. If Sun stops additional infusions and USDD's exchange rate doesn't recover in the process, TRX will undergo a massive sell-off.
StormGain Analysis Group
(cryptocurrency trading, exchange and storage platform)
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