#TRON’s USDD dips below 96 cents as stablecoin enters third day adrift

Tron’s Decentralized USD (USDD), an algorithmic stablecoin inspired by TerraUSD, entered its third day trading below $1 on Wednesday. 

The token dipped as low as $0.959 this morning before recovering to $0.974 at the time of writing, according to CoinGecko data.

USDD shares the same algorithmic model of mint and burn as the now-collapsed TerraUSD (UST). Whenever the price of USDD is below a dollar, the system allows you to burn one USDD to mint $1 worth of tron, USDD’s sister token on the Tron blockchain.

USDD first lost its dollar peg on Monday amid a broader crypto market slump. It traded around the $0.98 mark yesterday before another dip this morning. Amid the USDD de-peg, the price of tron (TRX) got slashed by roughly 16% today, and is changing hands at $0.05. 

With USDD losing its dollar value, there may be intense pressure on tron. This is similar to how UST’s de-peg led to an implosion last month of its sister token called luna.

Meanwhile, the Tron DAO Reserve, a body that exists to defend USDD’s peg, has been acquiring assets to back up the stablecoin’s value. It has bought more than 1 billion USDC in recent days and holds an additional $500 million worth of assets like USDT, bitcoin and tron. So far, however, the team’s accumulation of capital reserves has not restored confidence in USDD’s value.

Therefore, in order to prepare for the worst outcome, Tron DAO announced today it would pull out 2.5 billion TRX (worth some $125 million) from the Binance exchange. Taking its token off exchanges will allow the team to prevent traders from taking large short positions on the asset. This also ensures Tron DAO can maintain a large reserve of TRX tokens, adequate enough to redeem USDD holders. 

   
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